Comverse Says Business Slows; Stock Sinks

Shares of telecom software provider Comverse Technology (CMVT) are plunging today, down over 20%, or $3.42, at $13.50, after the company last night filed a form 8-K with the Securities and Exchange Commission that indicates signs business is slowing. The company said in its filings that “”slower momentum, in particular at Netcentrex, along with some delayed purchasing decisions in the core business […] along with the foreign exchange headwinds relating to expenses we have experienced, has put pressure on our business performance.” Comverse bought Paris-based Netcentrex in April of 2006 for $164 million in cash.. The product is a telephone switch for transmitting phone calls over the Internet.

In addition, the company, which has been investigating its accounting for past sales, said it would may not file the results of its investigation this Fall, as it had expected. “The substantial extent of the work and the complexity around revenue recognition, and VSOE [vendor specific objective evidence, regarding delivery of product] in particular, will probably cause us some further delay,” the company said.

Two analysts downgraded the stock today, with JP Morgan’s Sterling Auty reducing it to “Neutral” from “Overweight,” while RW Baird’s William Power cut his rating from “Outperform” to “Neutral.” Power reduced his price target on the stock to $14 from $23, while Auty does not offer a price target.

“We think this uncertain market is not going to have the patience for another delay” in financial filings, writes Auty. Auty recommends looking back into the stock once the filings are “done or imminent.” Auty says the comments about slowing business are “not surprising as we have heard the same comments from most of our other companies.” Auty thinks the company’s goals for mid-teens operating margin in the next year-and-a-half “might prove challenging.”

Baird’s Power writes “we expect the significant business and accounting uncertainties to present meaningful headwinds for the stock.” Power writes that “we now have less faith in our previous estimates” given “the lack of SEC filings now for over two and a half years.” Comverse was a poster child for the options-backdating scandal. Just last week, there were revived rumors of a buyout of several of the company’s business units.

Comments

[eid:]

Analysts are again rushing to conclusions without any basis for their opinion. Comverse has not filed any annual or quarterly accounts since 2007 and as such there is no financial information for the basis of any valuation. To state that business is slowed is like saying the results are x-y with x based upon an out of date 2007 basis and y assuming a reduction below x which may or may not be correct. The CFO has indicated the quarterly financials will not be available until December 2008 and that stage they will be going for relisting. Until that date it is only speculation as to what the financial position and results of the company are. The income recognition is a problem that will be faced by numerous companies where income cannot be recognised until it is realized with certainty so delivery of goods and services is not sufficient for income recognition the goods need to paid for as well before income can be recognized.

2008 Aug 17 03:38 AM

[neattrader:]

Comverse CEO, Andre Dahan, gets bonus despite his lame performance.
I have a very good friend working for Comverse , these guys are tired, CMVT is not where I put my money.

Apr 26 07:08 AM