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Technology Stocks : Comverse Technology -- Ignore unavailable to you. Want to Upgrade?

To: Beltropolis Boy who wrote (831)	8/30/1999 9:53:00 AM
From: Kalman	Read Replies (3) \| Respond to of 1331

An article about Kobi from Ha'aretz. What is Kobi Alexander afraid of? By Guy Rolnik He is afraid of becoming another David Rubner.Most people would love to be David Rubner. He runs the decade's star high-tech firm in Israel: ECI Telecom. He had a crucial role in the company's stellar success. He was compensated not only in kudos but also in salary and options worth millions. But from Kobi Alexander's position, becoming Rubner is a bad dream. From the point of the market valuation of Comverse Technology, the company Alexander leads and controls - reaching the valuation ECI has been stuck at for three years is a worst-case scenario. Whence our familiarity with Alexander's apprehensions? He himself divulged them, in recent interviews and by virtue of the pressures he has imposed on the Finance Ministry and prime minister against the plan to amend the laws governing state subsidies for R&D by big business. Why would Kobi Alexander, heads of a company that trades at a market valuation of NIS 6 billion and nets $150 million a year, take all this trouble to torpedo the attempt to reduce taxpayer support for R&D? Comverse today is a world leader in developing, producing and marketing voice boxes. It is growing very fast; two years ago it swallowed up one of its biggest rivals. Now Comverse boasts the largest market segment in Europe and the United States. Ostensibly, Alexander shouldn't be losing any sleep over the R&D law. The support that the Chief Scientist at the Ministry of Industry and Trade sends to Comverse every year is truly minor in comparison to the company's volume of sales, profits, or total outlay on R&D. We may assume that Alexander's worry isn't about Comverse itself or his stake in it. As a person who has already made his fortune and who can assure the financial futures not only of himself but of a few generations of Alexanders to come, Alexander is probably fretting mostly about the damage that he believes will be caused to Israel's entire high-tech industry if the government slashes subsidies for R&D. But beyond his Zionist considerations, Alexander has a good economic reason to fear a cut in R&D subsidies. Indeed, a cut in state support would reduce by only a few cents the profit per share on Comverse stock, which is expected to total $2 per share in 1999. But a deviation of a few cents in the profit per share item weigh like a ton of bricks on a company like Comverse. Comverse is, to date, trading at a valuation of $6 billion, 40 times its predicted net profit for this year. Comverse's valuation is based on its ability to present a growing profit per share every quarter. This growth is not incidental; it is monitored, regulated, and controlled insofar as is corporately possible by the company's management, led by its CEO and chairman, Alexander. Comverse achieved a valuation of $6 billion in part because its leader is sensitive, attuned and attentive to Wall Street whispers. He is religious about telling analysts what they like to hear: Comverse's profit per share surprises in exactly one direction, and that's upwards, and not by much at that. A nasty surprise in the form of a small slump of a few cents per share could turn Comverse overnight into ... another ECI. An excellent, profitable high-tech company that is trading at a profit multiple of 15, because analysts are disappointed in its capacity for growth. En route from Comverse's multiple to ECI's multiple, a few billion dollars could disappear, including Alexander's personal holdings. But the blow isn't only financial. Comverse's high share price is one of the main weapons in its arsenal. It is its currency, its engine of expansion. A person who knows how to keep the share price high can keep moving forward; people with weak multiples of 15 stumble in the cruel world of high-tech, and may one day face the firing squad. The 160 percent leap in Comverse shares over two years brought the company from Ramat Hahayal to the place Alexander wants to be: a position from which he can base further moves, mergers and share swaps. Alexander wants Comverse to be the "Israeli Cisco," a growing company that conquers by acquisition. From where he is today, becoming ECI is indeed a bad dream. © copyright 1999 Ha'aretz. All Rights Reserved