from goldilocks and the bulls (to steal a friend's phrase).
-----
Goldman Sachs Research
October 28, 1999
Comverse Technology (CMVT)
Reit. RL Rating; Establish Conserv. 2001 EPS Est. of $2.98
LOOKING FORWARD: NOT YOUR FATHER'S VOICEMAIL We expect robust wireless handset growth and accelerating penetration of voicemail in the
land-line market to continue driving Comverse's growth over the next three
years. However, we believe new product offerings will play an increasingly
important role for Comverse, and could drive upside to our estimates.
Comverse has successfully begun to leverage its core voicemail platform to
offer new, value-added services, such as pre-paid wireless, one-touch call
return, short-text messaging, voice-activated dialling, and unified messaging. In
second-quarter 1999, for the first time, more than 10% of total revenue was
derived from such higher-margin, software-based products, because Comverse
is beginning to benefit from a large cross-selling opportunity.
At the end of the second quarter Comverse boasted over 25 pre-paid wireless
customers, over 20 one-touch call return customers, over 30 unified messaging
implementations, and over 50 short-text messaging (for wireless
communications devices) customers. Of these existing, add on services, we
believe pre-paid wireless could offer the largest opportunity for Comverse.
According to a number of market estimates we have seen, there are currently
about 25m prepaid wireless subscribers worldwide. Based on current growth
rates, we believe this number could double by 2002.
NEW PRODUCTS; NEW DIRECTIONS Below, we highlight two new product
offerings for which we recently observed demonstrations. We believe these
products are not only important new sources of revenue for Comverse, but are
instructive as indicators of the company's future product direction and strategy.
We believe [sic] the convergence of voice/data.
INFOPEELER: BRINGING THE INTERNET TO YOU InfoPeeler, is
Comverse's recently introduced web-based, information 'push' service, which
allows network subscribers to specify specific information (from any web-site)
that they would like sent to their wireless handset at a specified time/date
/interval, etc. Network operators can customize the portal to offer different
categories of information choices (ie, stocks, sports, weather, entertainment
news, airline schedules, etc) and individual users can set up
personal profiles to receive the exactly the information they
need. Moreover, if the type of information needed is not
provided in the pre-determined categories set up by a network
operator, users can pull down specific data points from
anywhere on the Web, and have such data (updated regularly)
sent to their handset. No special phone or software add ons are
needed by the network subscriber in order to use this service,
and it is compatible with both WAP and non-WAP enabled
phones. This service is in early stages of roll-out at initial
customers, but we believe it could be a very exciting new
product area for Comverse. In our view, Comverse is well
positioned to benefit from the migration of the Internet as purely
a PC-based phenomenon, to a global information network
accessed from a wide range of telephony devices.
Tel@GO: DOING IT ALL WITH VOICE At Telecom '99, we
attended a demonstration of Tel@GO, Comverse's fully
voice-activated messaging, scheduling, and task management
system. Tel@GO is based on an 'intelligent', easy-to-use,
natural voice recognition system and allows subscribers to
check and respond to E-mail and voice mail, set appointments in
a network based calendar, create and update address books,
browse the Web, retrieve news, and place calls, ALL BY USING
SIMPLE VOICE COMMANDS. Moreover, the system
synchronizes with PDAs, and with such software as Microsoft
Outlook. The natural voice interface which we saw in the
product demo did not require any special syntax or key words. In
automatically extracts relevant information from the speaker and
prompts the user for more information if needed. The Tel@GO
system also can retrieve ad-hoc information from the Internet
(such as the weather in London, or the latest sports news) or
pre-defined personalized information. We were quite impressed
with the range of services and flexibility demonstrated, and
came away with the impression that this type of product could be
very attractive to both users (due the flexibility, ease-of-use,
single point of contact, unified messaging capabilities, etc.,) and
network operators (due to the increased air-time such a system
could generate-users would spend substantially more time on
the phone, and the opportunity for specially targeted, revenue
generating services.) AT TELECOM '99, WE LEARNED THAT
THIS PRODUCT IS CURRENTLY BEING IMPLEMENTED-AND
ROLLED OUT FOR USE BY SUBSCRIBERS-AT A US-BASED,
NATION-WIDE PCS CARRIER. |
