Why Comverse is Better Priced Than Amdocs

Includes: CMVT, DOX
by: Shlomo Greenberg

Amdocs (NYSE:DOX) is one of the stocks participating in the ever-expanding IT race, which is becoming increasingly competitive and which, most importantly, has only just begun, with plenty of money for the winners.

Amdocs is traded at around its all-time high (and you won’t find many stocks of which that can be said). It took the company a good many years to convince Wall Street that it is the leader in complementary services to giant end-user companies. It achieved this not just by virtue of its excellent management and service, or of the quality of its products and technology. The company’s status is becoming stronger as a result of the trend that is taking over the market: consolidation. This has given Amdocs a better launching platform for the future. In other words, Amdocs gives the big companies the solution that appears to be the best, and the more companies grow, the greater will be their need for Amdocs’s products.

Amdocs has created a need for its products and services. Wallstreet.net associate editor Henry Truc recently interviewed Mike Couture, Amdocs VP for solutions marketing. Couture claims that Amdocs is poised to capitalize on significant growth opportunities that are expected in the IP market. He says that the company has added some strong growth engines through acquisitions and through investment in its product and is therefore well placed to enjoy growth in the next twelve to eighteen months. “We’re serving the leading service-providers around the world,” he says. “This is an industry that’s in transformation. There are some major market forces. The convergence, from a technology perspective, and from an industry perspective, there’s a heated competition now in the service-provider space with new entrant. We also see strong consolidation or strong trends for consolidation and there are many examples in North America that we’ve seen recently and the trend is also accelerating in Europe.”

Couture feels that the convergence, consolidation and competition have created an ideal opportunity for Amdocs. “What differentiates us is that we bring together a unique collection of assets,” he says. “We have a broad portfolio of software products and services that help service providers across the enterprise be more efficient to serve their customers better. We have a very strong industry focus.”

I think that the stock is a bit too expensive and, at this point, I prefer Comverse Technology (Nasdaq: CMVT). Comverse is currently suffering from the aftermath of the Kobi Alexander affair, but everything is fine on Main Street. Having been pushed downwards under the weight of the ‘Kobi stories’ Comverse’s stock is at values that are fairly low considering its history, and as I don’t foresee any business crisis for Comverse, I consider this is a buying opportunity. Incidentally, I feel that Comverse, which recently entered the billing and CRM field, is Amdocs’s real rival, and I still consider it ridiculous that these two companies have not yet merged.

DOX, CMVT 1-yr Chart

Published originally by Globes [online], Israel business news - www.globes.co.il © Copyright of Globes Publisher Itonut (1983) Ltd. 2006. Republished on Seeking Alpha with full permission.

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