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

To: NotNeiderhoffer who wrote (584)	12/1/1998 4:50:00 PM
From: Bill McCullen	Read Replies (2) \| Respond to of 1331

Can you say BLOWOUT!!!!!!!!!!!!!!!!!!!!!!! $0.62 vs expectations of $0.56 Only possible problem could be light revenue ------------------------------------------------------------- Comverse Technology Announces Record Third Quarter Results: Earnings Per Share -Diluted- Of $0.62 Vs. $0.39 Sales Up 27%, Net Income Up 60% To Record Levels WOODBURY, N.Y.--(BUSINESS WIRE)--Dec. 1, 1998--Comverse Technology, Inc. (NASDAQ:CMVT - news) announced for the third quarter of fiscal year 1998, ended October 31, 1998, record net income after taxes of $29,121,000 ($0.62 per diluted and $0.66 per basic share), an increase of 60% over the third quarter of fiscal 1997. The Company also posted record sales of $178,107,000 for the third quarter of fiscal 1998, an increase of 27% over the third quarter of fiscal 1997. Kobi Alexander, Chairman, President and CEO of Comverse, stated, ''The increase in third quarter sales reflects continued strong demand for Comverse's products. More than 270 wireless and wireline telecommunications network operators around the world have selected Comverse Network Systems Division's enhanced services platforms, which enable the provision of call answering, prepaid wireless services, voice/fax/text messaging and other revenue-generating enhanced services. In addition, sales of our Comverse Information Systems Division's multimedia recording and monitoring systems continue to benefit from a major global market transition, in which users such as call centers and law enforcement and intelligence agencies replace outdated analog systems with digital technology.''

To: NotNeiderhoffer who wrote (584)	12/2/1998 12:09:00 PM
From: Beltropolis Boy	Respond to of 1331

kampai \käm-'pi\ interj [kampai!] chiefly japanese — used as a toast ----- Piper Jaffray increased its full year 1999 earnings estimate for COMVERSE TECHNOLOGY (63-5/8, up 5-3/8 @ 10:36 ET) to $2.76 from $2.62. Lehman also raised its FY 1999 EPS estimate for the company to $2.77 from $2.62. Further information was not immediately available.

To: NotNeiderhoffer who wrote (584)	12/21/1998 2:51:00 PM
From: Beltropolis Boy	Read Replies (2) \| Respond to of 1331

excerpts from tim luke's latest write-up (part 1 of 2). interestingly, he notes that comverse may spin-off a portion of the CIS division and cites a new competitor, Intervoice (INTV). ----- Comverse: Mgmt Meetings Stress Excellent Trends/Visibility; Buy (Pt 1/2) Author: Tim Luke 1(212)526-4993 Rating: 1 Company: CMVT ERICY LU INTV Rank (Old): 1-Buy Rank (New): 1-Buy Price : $68 1/16 52wk Range: $70-29 Price Target (Old): $75 Price Target (New): $85 Today's Date : 12/14/98 Disclosure(s): A-Lehman Brothers Inc. managed or co-managed within the past three years a public offering of securities for this company. C-Lehman Brothers Inc. makes a market in the securities of this company. * On December 11, Lehman Brothers hosted a series of meetings with management of Comverse Technology that provided an opportunity for management to underline that current business trends remain excellent. * We now believe Comverse is poised not only to exceed our estimates of $189 million and $0.63 in 4Q98 (ending in January) but also that the outlook for 1Q99 is very strong, with visibility already extending to over half of the quarter's targeted sales. * In addition, the successful rollout of a series of new services such as prepaid wireless, voice dialing and "one touch" call return should position Comverse to exceed our revenue estimate of $834 million in FY99, while gross margins may continue to beat our projected 60.2% * Based on this robust outlook, our estimates of $2.77 in FY99 and $3.32 in FY00 are likely to be revised steadily higher throughout 1999. Plans to spin off the slower growth Comverse Information Systems unit could also add to the company's growth rate. * Given current business momentum and visibility, we view the shares as attractive at 25 times our FY99 estimate. We reiterate our 1-Buy rating and our 12-month price target of $85, or approximately 25 times our conservative FY00 estimate of $3.32. Management Highlights Excellent Visibility; Backlog Should Move Higher During a series of meetings held on December 11 in New York, Comverse management underlined that current business trends remain robust. We were especially encouraged to hear CEO Kobi Alexander confirm that the company has excellent visibility on orders through at least the first half of 1Q99, ending in April. Comverse closed 3Q98 with a record backlog level of around $155 million and we contend that this level is likely to rise again in 4Q98, ending in January. We maintain that our revenue and earnings forecasts for 4Q98 of $189 million and $0.63 remain conservative. New Services Could Add to Growth Rate Looking into FY99, we are especially excited about the flow of new systems and services Comverse will be rolling out to its customer base. Following a highly successful trial with a major U.S. wireless operator, Comverse is poised to launch its "one touch" call return service for general availability. In addition, management revealed that it now has won 10 customers for its systems that enable operators to offer prepaid wireless services. We believe Comverse is likely to emerge as a major player in this fast growing market in which Ericsson is currently the market leader. Other important new services that are likely to gain momentum in FY99 include caller assistant, voice dialing and short text messaging. We maintain that the new services could move from the current level of 10% of total Network Systems sales (versus 90% traditional voicemail) to as much as 15%-20% in FY99. These new services should help Comverse continue to outpace the growth of the overall global enhanced services and messaging industry, which we estimate to be expanding at around 20%-25% and which should reach around $1.5 billion in FY98. Margins May Continue to Improve Due to New Services, Installed Base, Pricing Environment The rollout of these new services (which are often highly software intensive) is one factor that may position Comverse to continue to see its gross margins trend upwards. We have modeled gross margins of 60.2% for each of the quarters FY99 -- in line with the level recorded in 3Q98. However, gross margins have trended upward throughout FY98 and we believe the launch of these new offerings, combined with the increased level of sales to Comverse's installed base, may help extend this pattern. In 3Q98 sales to existing customers accounted for around 70% of revenues, up from approximately 66% in 2Q98. Management also commented that the current pricing environment in the messaging industry remains fairly benevolent. Competitive Positioning (Versus Octel/Lucent and Others) Appears Strong Management's presentations appeared to confirm our own checks, which indicate that that Comverse is continuing to strengthen its competitive positioning in the messaging industry. We believe Comverse should be able to maintain its current win rate of over 50% in greenfield bids in 1999 and we think the company should be able to continue to hold around 40% market share. We have been encouraged by Comverse's success in competing with the new IMA platform from Octel (which is now a division of Lucent). While investors have expressed some concern regarding the potential impact of the long awaited launch of a new platform by Octel, we believe Comverse is comfortably holding its ground against the IMA. It also appears that the systems may not be fully featured with services such as "one touch return" until 2Q99. We believe Octel's market share is approximately 20%-25% while Unisys holds around 12%-15%. We expect some of the smaller vendors to continue to cede share to Comverse and Octel in 1999. We note, however, the Intervoice (INTV - $321/8; NR) is one player in this sector that has demonstrated strengthening momentum in recent weeks, racking up a number of significant order wins. (CONTINUED IN PART 2)

To: NotNeiderhoffer who wrote (584)	12/21/1998 3:02:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 1331

Comverse: Mgmt Meetings Stress Excellent Trends/Visibility; Buy (Pt 2/2) (CONTINUED FROM PART 1) Spinoff of Comverse Info Systems Could Increase Corporate Growth Rate Investors may be encouraged by management's confirmation that it is considering the possible spinoff of the company's Converse Information Systems (CIS) division in 1999. The CIS division -- which we estimate at around 9%-10% of revenues -- is made up of Comverse's governmental recording business, which uses the AudioDisk brand name, along with the commercial voice recording unit, which targets the call center market using the Ultra platform. While we maintain this unit has significant potential in both the government recording market and the call center arena a number of factors -- including the impact of legislative delays on the U.S. government market -- have meant that revenue growth from CIS has been in a 10%-20% range. This is somewhat lower than the 25%-35% growth rates seen in the Network Systems area. We think that the CIS unit could benefit from being more tightly focused as an independent entity. At the same time, Comverse's overall revenue growth rate might trend upward if the company was exclusively targeting the enhanced services market. DGM&S Division May Also Be Heading for Independence Management also highlighted that its fast growing software solutions unit known as DGM&S could also be spun off as an independent entity. DGM&S was acquired by Comverse in 1995 and has grown to an estimated sales level of around $20 million in 1998 -- up roughly 40% year over year. The unit has emerged as a leading supplier of SS7 and other high-value-added software solutions, selling to a long list of operators and equipment vendors. While Comverse would clearly retain a majority stake in DGM&S, we contend that the business could benefit from the perception of greater independence -- particularly in its efforts to sell to other equipment companies. While we do not view the spinoff as imminent, it appears that DGM&S could return to independence at some point in FY99. Asian Sales Appear to Be Stabilizing Our discussions with management also appeared to endorse our view that the company's sales into Asia may be stabilizing. Sales to Asia trended upward in 3Q98 to around 16% of total revenues $28 million versus approximately $23 million in 2Q98. In addition to the 3%-4% of sales in China and 6% in Japan which have remained relatively steady markets, it now appears that Comverse is seeing some modestly improving trends in Taiwan, Australia, Singapore and Korea. Management highlighted that despite winning several awards in Brazil and Mexico in recent months, it expects growth in Latin America to lag behind the pace of expansion in Europe and the U.S. in 1999, with these two regions likely to remain the key growth engines. Stock Opinion: Comverse Remains a Top Pick in Telecom Equipment Following strong recent 3Q98 results, with the company beating the consensus expectations (for the eighteenth quarter in a row) we raised our estimates once more. Our FY98 earnings estimates moved to $2.31 and our FY99 estimates increased to $2.77. We also introduced an initial 2000 estimate of $3.32. Our revenue estimates are $695 million in FY98, $835 million in FY99 and approximately $989 million in FY00. Our confidence in these estimates moving upward over the course of 1999 partially reflects Comverse's improving gross margin outlook as the company sees improving volumes, increased manufacturing efficiencies and a higher level of repeat sales to existing customers. As highlighted earlier, we believe that our 60.2% estimate for FY99 could prove conservative given an increasingly large percentage of software in Comverse's product mix. We have also been encouraged by the rising backlog levels and Comverse's ability to continue to extend its market share despite the release of an improved competitive offering from Octel/Lucent in the form of the new IMA platform. We believe Comverse is seeing strong new business win rates, with the addition of approximately seven new customers in 3Q98. Comverse's core Network Systems is likely to continue to benefit from the expanding demand from wireline and wireless telecom service providers that are seeking to add revenue-generating enhanced services such as voicemail and information services. Meanwhile, the Comverse Information Systems division is well placed to exploit the transition from analog to digital recording and monitoring systems by both government agencies and corporations. We contend that Comverse's valuation remains compelling at 25 times our conservative calendar 1999 estimates. Our price target of $85 is based on our view that over the next 12 months investors are likely to focus on the company's earnings growth in excess of 25%, allowing the shares to achieve a multiple of approximately 25 times our conservative calendar 2000 estimate of $3.32. part 1 of 2: lehman.com part 2 of 2: lehman.com