Israeli billing giant Amdocs (NYSE: DOX) takes care to avoid publicity as much as possible. Its managers almost never grant press interviews, and apart from its official documents submitted to the US Securities and Exchange Commission, Amdocs does not release much information. In December, Amdocs submitted its F20 form - a detailed document US companies are required to submit. The document contains a great deal of information and informs investors about the state of the company.
The most interesting figure in Amdocs's document concerning the four quarters ending in September 2001 is that the company increased the number of its information technology (IT) employees to 1,200 in the period of the report, thereby confirming previous reports in "Globes". As of the end of September, Amdocs employed 9,700 full-time workers worldwide, compared with 8,400 at the end of September 2000. Amdocs employed 4,200 programmers and information systems specialists in Israel, compared with 4,000 in the previous year. The company had 2,700 IT workers in the US, compared with 2,200 in the previous year, and a total of 1,100 management and administrative employees in 2001, compared with 1,000 the previous year.
Of interest is the fact that at the end of September 1999, Amdocs had 5,000 employees around the world, i.e. it doubled its staff in two years. Amdocs’s increased manpower in 2001 is particularly remarkable, in view of the large-scale layoffs by most high-tech companies. In any case, Amdocs’s programming and information systems staff in Israel grew by only 200 in the past year.
In order to house its employees, Amdocs rents 107,000 sq.m. of offices in Israel at a cost of $22.3 million per year. Most of Amdocs’s office space (58,000 sq.m.) is in Ra’anana, with more in Ramat Gan, Haifa, Hod Hasharon, and Jerusalem. Of particular interest in this context are the Amdocs offices in Cyprus, where the company has a development center. Its Cyprus offices occupy 15,000 sq.m., 14% of the space it rents in Israel.
Amdocs acquired a number of companies. In November 1999, it completed the acquisition of International Telecommunication Data Systems (ITDS) for $189 million in shares. It acquired Solect Technology Group of Canada in April 2000 for $1.1 billion in shares and Clarify in November 2001 for $200 million in cash.
These acquisitions caused a stir, and Amdocs may have to report some kind of amortization for them in the coming quarters, due to the new US SFAS 142 accounting standard, or else stop regular amortization, which would substantially improve its profit. The new US standard stipulates that if the acquiring company still lists goodwill in the balance sheet for the acquired company after the acquisition, the acquiring company can no longer amortize the goodwill by a regular percentage each year. It must consider each time whether and by how much goodwill should be amortized.
In its document, Amdocs notes that it has not yet decided what to do about its goodwill. Amdocs amortized $103 million for goodwill in 2000 and $202 million in 2001. That means that, depending on the action Amdocs decides to take over the goodwill on its balance sheet, it could add tens of millions of dollars per year to its net profit. As of the end of September 2001, the goodwill and other intangible assets item on Amdocs’s balance sheet stood at $788 million.
Analysts usually discount amortization of goodwill, since it has no effect on cash flow, and Amdocs issues pro forma reports that exclude amortization of goodwill, in addition to its regular reports.
The more piquant part of Amdocs’s financial report concerns salaries. The combined salaries of 23 Amdocs managers totaled $15.5 million in 2001. During fiscal 2001, Amdocs directors and management received 793,000 options at an average exercise price of $36.20 per share, compared with the current price of $39. The options distributed have a vesting period of up to eight years.
Every Amdocs director who is not an employee of either the company or one of its large shareholders can choose either an annual salary of $30,000 or options to buy 10,000 company shares once every three years. Every director also gets $1,500 for each board of directors meeting and $500 for every board committee meeting.
US communications giant SBC International is the largest shareholder in Amdocs, with a 14.4% stake, and is also Amdocs’s largest customer. Other shareholders are British corporation AXA (7.4%), and Welsh, Carson, Anderson & Stowe (5%), a holding company that invested in Amdocs before its IPO and has already sold shares for hundreds of millions of dollars.
13.3% of Amdocs’s sales in 2001 were to SBC, compared with 12.6% in 2000.
Published by Israel's Business Arena on January 10, 2002