Comverse’s controlling shareholder Kobi Alexander started out as an investment banker at Shearson-Loeb, which later became Smith-Barney. Alexander’s brother-in-law, Boaz Meshuli, originated the idea of establishing a company in Israel to develop computerized voice mail.
Comverse first went to the stock exchange in the US in 1986. Comverse, the parent company of Efrat, which is listed in the US, raised $6.5 million at a company value of $20 million. Efrat began to develop its flagship product, Trilogue, which provides voice mail services for a single organization. Meanwhile, the company also developed voice products for Israel’s defense industry, including police and military.
In the years the followed the initial public offering, Comverse encountered financial difficulties. The market was difficult to penetrate and the company couldn’t get off the ground. In 1988, against the backdrop of disputes concerning management methods, Meshuli and Prof. Yechiam Yemini left Comverse, selling their shares to Alexander. Meshuli then founded Aura and its subsidiary Magma, both of which are listed for trading on the Tel Aviv Stock Exchange.
At this time, Comverse began drafting a new strategy. Instead of developing voice mail products for the extremely competitive organizational market, Efrat decided to direct itself toward the institutional market, voice mail systems for the use of the world’s largest telephone companies. The idea was to connect Trilogue to central telephone networks and enable telephone companies to provide services at a national or regional level.
The strategic change demanded the development of an extremely reliable system able to support a huge number of calls. The Trilogue system Comverse sells today can support more than one million phone lines.
The institutional market in which Comverse specializes, as opposed to the organizational market in which companies like Nice operate, is characterized by a very high entrance threshold, demanding a great deal of investment in development, production and customer support. However, once it passed this threshold, Comverse found itself in another league altogether, the big league.
Since 1990, Comverse has been growing rapidly, and sales have increased by tens of percents annually. Comverse’s civilian communications products, headed by the Trilogue product line, constitutes about 70% of the company’s current sales. The Trilogue system enables processing multimedia messages and audio data services via telephone and fax.
The system enables the provision of many services as well as simultaneous multi-user connections. The services include personal voice mailbox and audio and fax processing. Comverse’s clients number some of the world’s largest telephone companies and, until the merger with Boston Technology, the company held 25% of the market. The joint company created by the merger will lead the industry and hold about 50% of the market.
The global market for Comverse products is currently estimated at about $1 billion annually and growing rapidly. The reason for this rapid growth is the desire of the telephone companies to constantly increase the number of phone calls they handle. According to Comverse’s past calculations, a standard Trilogue system which costs hundreds of thousands of dollars and serves a medium-sized city, pays for itself in less than two years.
Comverse is a US company, but it’s heart is in Israel, namely Efrat Future Technology, located in Tel Aviv’s Ramat Hahayal industrial zone. Efrat employs about two-thirds of Comverse’s personnel and is responsible for about 70% of the company’s revenues.
Comverse’s growth, with current annual turnover of $200 million, is clearly manifested in the division of Efrat’s work force. Efrat’s 250 employees of four years ago multiplied to 800 by the end of 1996, and by now their number has reached 1,200. Efrat’s currently hires about 45 new employees monthly, or an annual pace of 500. This pace is planned to double, due to the merger with Boston Technologies.