Although options scandal at Comverse Technology Inc. (Nasdaq: CMVT) has not yet abated, it’s business as usual at the company. In the past two days, Comverse Technology subsidiary Comverse has announced two new contracts. The first is with Rogers Wireless Inc., Canada’s larges wireless operator, which selected Comverse’s mobile instant messaging solution, which will enable its customers to use their cellular phones to call Yahoo! Messenger and MSN Messenger.
Comverse’s second contract is with IP communications service company Skype, which bought Comverse’s new Klonie avatar service. Avatars are personalized graphic figures that reflect the user’s mood. Comverse provides added value services for communications operators.
Comverse did not disclose the size of the two contracts, but industry sources estimate the Rogers Wireless contract at a few tens of millions of dollars, and the Skype contract at several tens of millions of dollars.
Comverse CEO Zeev Bregman said, “Rogers Wireless is among the growing number of wireless operators who understand the revenue opportunity and importance of enabling subscribers to exchange instant messages with IM contacts when away from their desktops. Comverse's Mobile IM is becoming an integral part of operators' messaging portfolios and a 'must-have' service for mobile subscribers."
Commenting on the Skype contract, he said, “We believe that Klonies will be popular among Skype users, and will enhance Skype's reputation as an industry innovator. In addition, the Skype Klonies will be valuable for Skype in the mold of other personalization services, such as the ringtone and wallpaper market.”
Comverse Technology has a market cap of $4.5 billion, after losing 24% of its value since mid-March. A day before the company was due to publish its financial report for fiscal year 2005, ending in January 2006, the company announced that it had set up a special internal committee to examine matters related to the allocation of options to employees. The company postponed the release of the financial report indefinitely.
Comverse Technology founder, chairman and CEO Kobi Alexander, VP finance David Kreinberg, and corporate secretary and director William Sorin subsequently resigned. The company is suspected of backdating options to dates when the share was at a low point. The US Attorney's Office for the Eastern District of New York has subpoenaed company officers to testify in the case.
The options scandal has not prevented Thomas Weisel Partners LLC from giving Comverse an “Outperform” recommendation yesterday, although with no target price. The investment bank says, “While investors have been intensely focused on the investment overhand associated with the internal stock option grant accounting review, we believe that very little attention has been paid to Comverse’s fundamentals in a market that continues to offer tremendous growth opportunities, in our opinion… We believe that Comverse continues to respond to strong demand for IP voicemail, prepaid billing, ringback tones and other IP-based enhanced products.”
Thomas Weisel Partners analyst Tom Roderick updated his 2006 revenue forecast for Comverse from $1.53 billion to $1.61 billion, and his pro-forma earning per share forecast from $0.88 to $0.90 ($195.9 million). He included figures for Netcentrix, which Comverse acquired for $164 million in cash, plus $16 million to be paid upon meeting certain milestones.
Published by Globes [online], Israel business news - www.globes.co.il - on June 7, 2006
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