Time for explanations at Comverse

Shmulik Shelach

On Friday, Comverse investors said, loudly, what they think of Comverse Technology CEO Andre Dahan's autocracy.

"Dear Colleagues, I'd like to share with you an update on our business, our current activities and plans, and our outlook for the second half of fiscal 2010." Thus Comverse Technology Inc. (Pink Sheets: CMVT) CEO Andre Dahan began the letter to the company's employees dated August 12, in which he informed them of Comverse's problematic situation and of forthcoming layoffs.

On the face of it, this opening heralds great wonders to come. Here it comes, you say to yourself, a management that openly discusses the challenges and difficulties facing the company. This is a management that understands that sharing information with employees and investors is a must in order to cope with the threat.

However, anyone who has followed the fortunes of Comverse in recent years knows that nothing could be further from reality. Dahan, who manages the company as an autocrat, has no real intention of letting the employees in on the daily trials and tribulations. They are well aware of the situation, from the waves of layoffs that break over their heads every few months.

And what about the investors? They are no better off. The analysts who cover the company, and were no doubt taken by surprise by Friday's announcement, can only dream of talking to Dahan or his CFO. They don't get past investor relations manager Paul Baker.

Comverse under Dahan does not intend to confide in employees, investors, analysts, journalists, or even customers, about what is happening behind the scenes. Such an approach might have been conscionable when the company was meeting expectations, vague as they were, but the mass flight from the shares on Friday indicates that at least the investors have ceased to accept it.

Comverse's business in telecommunications is not as stable as it once was. In today's economic climate, telecommunication service providers are trying to trim expenditure on infrastructure, and that has left its mark on Comverse's performance in the first half of this year. But what happens next? Can Comverse get back to growth, or are its traditional businesses on a trend of continual decline?

Does Comverse's dwindling pile of cash make it hard for it to continue operating on today's scale, or will it even prevent it form producing new growth engines, that might be required faster it seems? Beyond that, why has the company's management waited till now to outline a plan for realizing assets? Could the bankers from Goldman Sachs not have provided "strategic options" say a year ago?

We would be glad to answer these and other questions that hover over the company, but we have no answers. In a company like Comverse, where the many question marks are its only certain characteristic, the management has an additional task besides day to day running of the company: to provide credible answers, and to engender a feeling that there is someone who knows where to steer the ship. It could be that Dahan and the management team do know, but on Friday a mirror was held up to them showing quite the opposite image. The market has had its say.

Published by Globes [online], Israel business news - www.globes-online.com - on August 15, 2010

© Copyright of Globes Publisher Itonut (1983) Ltd. 2010

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