mark.
thanks for throwing all the stellar press our way. lehman bro's just posted their latest write-up. fair warning: it was written, well, dated anway, pre-earnings release and is exceedingly bullish. a couple of the better excerpts follow, including mention of cutting into octel's bidnez. oh, and lest i forget, the obligatory price target, natch.
Merger With Boston Technology On Track & Offers Excellent Strategic Fit
In our opinion, Comverse's merger with Boston Technology represents a powerful strategic combination with Comverse's strength in the wireless market which represents 85% of CMVT's sales complementing Boston's expertise in the wireline arena which accounts for 75% of BSN's sales. From a geographic perspective Boston's leading position in its home market of the US, as well as as dominant position in Japan and in Brazil, provides excellent synergies with Comverse which has achieved market share leadership in Europe, Asia and several other international markets but has a relatively small presence in the US wireline market. The new combined entity would have over 200 customers with none representing more than 10% of sales. (Boston had five customers
representing over 10% of sales; AT&T, SBC, Bell Atlantic, Bell South and NTT).
Competitively Positioned For Industry Leadership
With Boston Technology and Comverse currently servicing 13 of the world's 20 largest phone companies, we estimate the combined company may have as much as 40-45% of the global enhanced services market. Other key competitors include Octel which was recently acquired by Lucent. We estimate that Lucent/Octel,
which occupies a dominant position in the corporate voicemail market, has approximately 20-25% of the global enhanced services market serving telephone operators (we estimate Octel holds approximately 50% share of the US market), with Unisys holding around 20% and several smaller players such as Centigram
and Glenayre making up the balance. Comverse and Boston having both aggressively expanded their market share in recent years (often at the expense of Octel). We believe opportunities may exist for the new company to extend its leadership over the next few quarters particularly ahead of the rollout of Octel's long awaited new Intelligent Messaging Architecture (IMA) platform now scheduled for release later in 1998. Overall pricing pressure in the enhanced services market appears to have remained relatively stable following the merger of two of the four largest competitors.
Stock Opinion; Reiterate Buy Rating, Price Target $65
We believe Comverse Technology's core Network System's business is likely to continue to benefit from expanding demand from wireline and wireless networks around the world as service provider seek to add revenue generating enhanced services such as voicemail and information services. Meanwhile, the Information Systems division is well placed to exploit the transition from analog to digital recording and monitoring systems by both government agencies and corporations. Our price target range of $65 is based on our view that investors are likely to focus on CMVT's earnings growth in excess of 25% allowing the shares to achieve a multiple of approximately 25x our revised 1999 estimate of $2.45.
lehman.com
lehman.com |
