Comverse Technology Inc. (Pink Sheets: CMVT) today began the laying off of 200 more employees, less than six months after the previous wave of firings. Most of the layoffs are at the company's headquarters in Israel, as part of a restructuring.
The company, which currently has 3,900 employees, is expected to later cut hundreds more employees at its headquarters, in an effort to cut costs and swing to profit.
Comverse CEO Andre Dahan told "Globes", "Whereas we once fired employees due to cash crises, while we continued to operate in the same way, we are now implementing a strategic plan, which makes clear to both us and to employees where we are progressing, and where we are changing procedures and measurements. Regrettably, there will be painful changes that we must make, because in order to recover, we must cut the company’s cost structure. The big difference, compared with the past, is that after quite a long time, we have a clear strategic plan."
Comverse's restructuring plan comes after the company announced in August 2010 that its cash reserves had shrunk to $327 million, and that it was liable to face liquidity problems in 2011. The company announced then a two-step restructuring plan, the first step of which was completed in October, and included 400 layoffs. The second step is now underway.
In order to return to profitability, Comverse formulated a new business plan, which included restructuring. The company will now comprise four independent business units, with an emphasis on billing systems for mobile carriers. Based on the plan's progress and performance, management will decide which departments will see personnel cuts in the future.
Comverse's employees are not the only ones worried about their future; investors are also uncertain. The financial report published two weeks ago states that it will not meet the timetable for publishing the annual report for 2010.
Dahan said, "From an accounting perspective, we have reached the point where we have submitted reports for the previous five years, which reflect the company's condition as of January 31, 2010. We are now focusing and concentrating on preparing the financial report for the fiscal year ending on January 31, 2011. We are building a detailed plan, and we will notify the US Securities and Exchange Commission (SEC) of the timetable for publishing the report by the end of February."
"Globes": Why is it so hard to estimate when you will publish the financial report?
Dahan: "It's impossible to ignore the fact that the difficulty in preparing the reports isn't because there is a mistake in them, but because the company used unacceptable accounting procedures, and we are now using new procedures. Accountants who look at a company where problems with backdating, accounting, inventory management, and recognition of revenue over the years occurred, thoroughly audit the financial reports before they sign the revised reports. This is a painful subject for everyone, and I prefer not to refer to accountants. If it were only backdating, we'd have finished this a long time ago. We are now nearing the end. One day we will stand up and announce that we have solved the problem."
In 2009, the cost of revising Comverse's financial reports totaled $113 million, after the company had already spent hundreds of millions of dollars on restating the financial reports for previous years.
How much more will you spend until you publish the financial reports?
"In terms of expenses, we do not normally share the figures with the market, but from this point, the expenses are falling each year, and the use of advisors falls with each quarter. Obviously, the cost for a company like ours should be less than $10 million a year, but it will take time until we get there."
How do you explain these gigantic expenditures to your shareholders?
"There is no doubt that there is no advantage to the shareholders from this process, but they understand the duty to report on time is a special duty, and that there is no choice. There are a lot of things that should have been done differently, but it's impossible to turn the clock back."
Comverse's share price fell 0.2% at the opening on Wall Street today to $6.58, giving a market cap of $1.34 billion.
Published by Globes [online], Israel business news - www.globes-online.com - on February 7, 2011
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