Comverse Technology
Encyclopedia
Comverse Technology, Inc. , originally founded in Israel
, is a technology
company located in Woodbury, New York
in the United States
, that develops and markets telecommunications software. The company focuses on providing value-added services to telecommunication service providers, in particular to mobile network operators. Comverse Technology has several wholly or partly owned subsidiaries. The name "Comverse" is a fusion of the words "communication" and "versatility".
Founded in 1982, the company went public on the Nasdaq Stock Market in 1986. Led by co-founder and CEO Jacob "Kobi" Alexander
, the company originally specialized in centralized hardware systems for voice and fax messaging and sold them to telecommunications companies and other large enterprises. Much of its funding came from Israeli government subsidies and tax credits provided to research and development for hi-tech firms. By the mid-1990s, one of its most successful products allowed legal authorities and intelligence agencies to record and store data collected from intercepted communications. Starting in the late 1990s, Comverse's voice messaging software became its main product and the company grew rapidly with the surge in mobile phone use, passing the $1 billion mark in revenues. It established a formidable position in the worldwide mobile voicemail
management market and sold a popular short message service center
product. While headquartered in the US, most of the company's research and development has been done in Israel; Comverse became one of the more visible success stories in Israel's hi-tech industry
. It has been one of Israel's largest employers of software engineer
s, was closely followed in the nation's business press, and was the first Israeli-associated company to join the S&P 500
index.
In 2006, Comverse was involved in an options backdating
scandal. Alexander and two other top executives were charged in the US with multiple counts of conspiracy, fraud, money laundering and making false filings. Alexander fled the country to Namibia
where he has been fighting extradition ever since. The scandal proved difficult for Comverse Technology to recover from; the company was delisted from Nasdaq, removed from the S&P 500, and spent the next several years consumed by the costly need to restate its financial reports for several years. Additionally affected by the financial crisis of 2008 and on and changes in the mobile phone market, the company underwent several rounds of large-scale layoffs and sold off parts of its business. By 2011 there were signs that the company was poised for a turnaround.
of Shearson Loeb Rhoades, engineer Boaz Misholi, and Alexander brother-in-law and Columbia University
computer science professor Yechiam Yemini, got together and founded an Israeli start-up company, Efrat Future Technologies Ltd. In a meeting in New York, Misholi had the idea of building a business around centralized hardware systems to support voice and fax messaging and selling them to telecommunications companies and other large enterprises, who could then resell the voice and fax services to their customers. The three quickly returned to Israeli and started the company, with the goal of securing Israeli government grants to fund the research and development work.
The early years of the company were difficult; in 1984, they founded Comverse in the United States, which became the parent company of Efrat. The name "Comverse" was chosen as a fusion of the words "communication" and "versatility".
In 1986 Comverse went public on the Nasdaq Stock Market with a $20 million valuation; the company used the money so gained as its final round of funding. The three founders had trouble working with each other, and Yemini divorced Alexander's sister; in 1987, Alexander was left with sole control of the company after the other two pulled out. The company was a penny stock
on the edge of collapse.
made a $6 million direct investment in the company. In 1990, Comverse won a potentially $10 million contract, its largest yet, to deliver computers running voicemail and fax applications on West German cellular networks, beating out far larger corporations in the process. Deutsche Telekom
became one of the company's biggest early customers. By 1991, the company had annual sales of $17 million and was selling a combined voice and fax mailbox system. Many of its early successes came from avoiding the huge telecommunications companies in the U.S. and instead focusing on selling to small- and medium-sized companies in the wireless market in Europe. The company also sought a variety of other markets, including developing countries such as Mexico and China for its Trilogue virtual telephone service. Gradually its product emphasis shifted more from hardware to software.
While headquartered in the U.S., nearly all its manufacturing was done in Israel, where it was able to substantially benefit from government subsidies and tax credits provided to research and development for hi-tech firms and industries by the Office of the Chief Scientist in the Ministry of Trade and Industry
and by the Israel-U.S. Binational Industrial Research and Development Foundation. Many other Israeli companies were built by the same model, including another top software company, Mercury Interactive
. During the 1990s, Comverse received at least 69 research and development grants from the OCS program.
In 1993, the company reported a 341 percent rise in profits on revenues in the $64 million range and was named a "Company to Watch" by Fortune
magazine. However its stock plunged for a while in 1994 after a disappointing earnings report.
By 1995, Comverse was best known for its AudioDisk product, which was sold to overseas clients and allowed legal authorities and intelligence agencies to record and store data collected from wiretaps. Half the company's revenues at that point were from AudioDisk, and market analysts were recommending Comverse's stock.
text messages becoming popular; the first big application for SMS was as a notification mechanism to tell a wireless subscriber that voicemail were stored in a voicemail box. Comverse expanded this application into a full-blown short message service center
(SMSC), which receives, buffers, processes, and dispatches all SMS messages throughout a mobile network. Comverse branded and productised this as the Intelligent Short Message Service Center, or ISMSC. Typical of telecomm software, it ran on Unix
-based platforms, such as UnixWare
and later Linux
. Comverse's ISMSC found success as a lower-price solution for lower-traffic networks, where it competed with Logica's Telepath solution. Other companies in the SMSC space included CMG
and Openwave
. ISMSC found considerable market penetration, exemplified by all six of Hong Kong
's wireless carriers using it.
Comverse also became a participant in forming international wireless standards, such as in 2001 for the Speech Application Language Tags
(SALT) markup language for XML
to add voice capabilities to web-based applications. Additional industry standards groups in which Comverse has been active include the Open Mobile Alliance
and TM Forum
.
In addition to growing organically, Comverse Technology began acquiring other companies in both Israel and the U.S. It acquired Dale, Gesek, McWilliams, & Sheridan, later known as DGM&S Telecom, in 1996 and renamed it Ulticom in 1999. Comverse Technology acquired one of its key rivals, Boston Technology, for $843 million in stock in 1997. The acquisition gave Comverse entree into the large U.S. telecommunications market and meant Comverse would be supplying voice messaging systems to 12 of the world's top 20 carriers, and left it the third-largest supplier after Lucent and Northern Telecom. In 1999, as it saw record earnings, Comverse formed two wholly owned subsidiaries, Comverse Network Systems and Comverse Infosys, representing the telecommunications services platforms and products and the digital monitoring and recording products, respectively.
By 2000, its revenues were $1.2 billion and it had global operations. It continued to aggressively acquire small companies to fill out its technologies, as exemplified by the purchase of Loronix, Gaya Software, and Exalink, all within a 30-day period in 2000. The company's stock price rose from around $10 in late 1998 to over $120 in early 2001. The company was able to raise money several times on Nasdaq, including once for its Ulticom subsidiary and once (at a valuation of $600 million) shortly before the Dot-com bubble
burst.
Comverse was one of the most prominent and profitable success stories in Israel's hi-tech industry
, with both Haaretz
and The Jerusalem Post
referring to it as a flagship of that industry. As CEO, Alexander was sought out for meetings in Tel Aviv
by world leaders such as Chinese President Jiang Zemin
. He became known, as Bloomberg News later stated, as "the wizard of Israel's technology boom"; his oft-stated goal was for Comverse to do for Israel what Nokia
had done for Finland
. Comverse was one of the largest employers of software engineer
s in Israel and its stock was widely held among the Israeli investing public; as a consequence, the successes and failures of Comverse were always followed closely in the country's financial press. (Amdocs
and Mercury Interactive
were two other prominent Israeli companies in the enterprise software sector that were also closely followed.)
The company was also quintessentially Israeli in how it was run, with Comverse CEO Ze'ev Bregman in particular favoring a loose, relaxed system in which he knew all the employees and lines of management reporting were frequently bypassed. When Comverse Technology joined the S&P 500
index in 1999, it was the first Israeli-associated company ever to do so. It set the same mark when it joined the NASDAQ-100
index.
The early 2000s recession
led to some struggles for Comverse Technology, with the global economic downturn leading to publicly announced profit warnings and a plunge in the stock price in July 2001. Over 3,000 jobs were cut during the period as part of several restructuring efforts.
The company still made some acquisitions, such as buying the instant messaging
specialist Odigo for $20 million in 2002, after having previously purchased a 12 percent stake in it in 2001.
The image of Comverse Technology as Israel's blue-chip hi-tech stock suffered, and led to a slide in several other large Israeli technology firms. Comverse's management was criticized by analysts for having issued over-optimistic forecasts, although many other Israeli firms in the industry did even worse or failed completely during this period.
In addition, the European market for mobile voicemail management was already saturated by 2002 and the prepaid wireless market was in decline. In 2002, Comverse Infosys changed its name to Verint, partly to separate its more thriving business from Comverse's struggles, and staged a modestly successful IPO of a minority portion of its stock. By 2002, Comverse Technology had more than 5,000 employees across nearly 40 countries; due to the partial spinoffs and economic difficulties, revenues were down to $735 million.
In December 2001, a Fox News report raised the concern that wiretapping equipment provided by Comverse Infosys to the U.S. government for electronic eavesdropping may have been vulnerable, as these systems allegedly had a back door through which the wiretaps could be intercepted by unauthorized parties. Fox News reporter Carl Cameron
said there was no reason to believe the Israeli government was implicated, but that "a classified top-secret investigation is underway". A March 2002 story by Le Monde recapped the Fox report and concluded: "Comverse is suspected of having introduced into its systems of the 'catch gates' in order to 'intercept, record and store' these wire-taps. This hardware would render the 'listener' himself 'listened to'." Fox News did not pursue the allegations, and in the years since, there have been no legal or commercial actions of any type taken against Comverse by the FBI or any other branch of the US Government related to data access and security issues. While no real evidence has been presented against Comverse or Verint, the allegations have become a favorite topic of conspiracy theorists.
By 2005, the company had $959 million in sales and employed over 5,000 people, of whom about half were located in Israel. That country held most of the research and development workers, many of whom occupied the company's seven buildings on HaBarzel in the Ramat HaHayal district of Tel Aviv
, while business and marketing operations were stationed in the company's Woodbury, New York headquarters.
scandal. In May of that year, company founder and CEO Jacob Alexander stepped down from his position. Alexander, finance chief David Kreinberg, and former senior general counsel William Sorin (both of whom had also stepped down) were charged in July 2006 in the United States District Court for the Eastern District of New York
with multiple counts of conspiracy, fraud, money laundering and making false filings to the Securities and Exchange Commission (SEC), all related to alleged options backdating or other actions related to stock options between 1998 and 2006. The accusations against the three included the backdating of options to when Comverse stock had been trading at low prices, the use of fake names of option holders, and the creation of secret funds in which to hold the illicit gains. The SEC also filed civil charges against the three, for filing false annual and quarterly financial reports and proxy statements from 1991 to 2005.
By then, Alexander had already fled the country and was classified a wanted fugitive in August 2006 by the US Federal Bureau of Investigation
. On 27 September 2006, he was arrested in Namibia
after hiding in Windhoek
with his family, where he had bought a house at a country club. If extradited to the US and convicted, he faced 25 years in prison.
He was released on bail and subsequently engaged in a long, and so far successful, battle to avoid extradition to the US (in Namibia neither money laundering nor options backdating is a crime). Upon leaving the US he had transferred some $64 million to Israel, with most of that ending up in Namibia; another $50 million was blocked by the US government, which overall sought the forfeiture of $138 million of Alexander's assets. In April 2010, Alexander won a victory in the Supreme Court of Namibia
that allowed him to continue to live and work in that country until the extradition request is finally ruled upon. In November 2010, Alexander agreed to pay the U.S. government $53.6 million to settle the SEC's case against him, with those monies being targeted to settle assorted lawsuits against Comverse by shareholders.
Of the other two executives, William Sorin pleaded guilty to criminal charges and was sentenced to a year in prison in 2007. David Kreinberg cooperated with prosecutors, repaid $2.4 million to the SEC, and in 2011 was sentenced to the "time served" of the minimal period he had originally been in custody. While over a hundred companies were investigated or charged with options backdating, Comverse was one of the most known cases, and in the words of a pair of financial writers, "Comverse was the poster child for stock option fraud."
Because of the accounting issues from the option backdating, Comverse Technology was unable to file full or timely financial reports with the SEC. Its stock was delisted from the Nasdaq Stock Market on 1 February 2007, and removed from the S&P 500
and Nasdaq-100
at the same time. The stock now trades on the Pink Sheets
. In 2009, the SEC settled its case with Comverse Technology; the company would not be subject to penalty fines over the backdating matter, but would accept a permanent injunction against itself regarding any future violations of law regarding publicly traded companies. A settlement in a similar case against Ulticom was also reached. The failure to file timely financial reports put the company at risk of having its stock registration revoked; a process deciding this, involving the SEC and an Administrative Law Judge
, is still active of 2011.
The financial crisis of 2008 and on caused further difficulties for Comverse Technology, with new layoffs occurring in October 2008, March 2009, and August 2009. The company reportedly lost considerable money in 2009, and the moves were typical of other hi-tech companies caught in the bad economic environment. Some of Comverse's products were still viewed highly; a Yankee Group
survey ranked them first in the world in their type of billing services, and they were the worldwide market-share leaders in providing multimedia message service centers to wireless carriers. However, the rise in popularity of smartphone
s and of sending e-mail
eroded the carrier market for some of Comverse's products and services. By 2009, the company's upper management was now largely American rather than Israeli, Dahan was under internal criticism, and there were frequent clashes regarding company culture.
By early 2010, Comverse Technology was planning to finally release an annual report with full financial statements and return to being fully listed on Nasdaq, but still was anticipating more layoffs.
One piece of positive news in July 2010 was an $80 million investment by well-known entrepreneur George Soros
.
However, the promised financial reports did not come, and an August 2010 public announcement that the company was short on cash and planning more layoffs and was subject to its stock being completely delisted caused a precipitous drop in the stock's price, with the market valuation of the company falling below $1 billion. CEO Dahan said simply, "These are challenging times."
By August 2010, analysts were stating that Comverse Technology might have to break up by selling off its subsidiaries and spin off Comverse's own business units. Running low on cash, Comverse Technology engaged Goldman Sachs
to explore such possibilities, with several large, well-known technology companies potentially interested in Comverse and some private equity firms possibly interested in Verint.
The company had some 4,000 employees, and continued having about half of them employed in Israel and most of the rest in the US and France. The continuing financial reporting problems had cost the company some $500 million in accountants' fees and related costs since 2006 and was the largest drain on its cash position.
The fact that senior management awarded itself bonuses in a time of various rounds of layoffs left employees feeling outraged. Comverse's restructuring also affected its 2006-acquired NetCentrex business unit in France, with layoffs or a shutdown possible. In October 2010, Comverse Technology agreed to sell its two-thirds ownership of its Ulticom subsidiary to a U.S. private equity firm for $90 million; the deal closed in December 2010. The company also sold part of its holdings in Verint, netting $80 billion, and sold for $27 million land in the hi-tech area of Ra'anana
, north of Tel Aviv, where it had been planning to build a new headquarters.
In October 2010, Comverse Technology finally published its restated financial reports for fiscal years 2005 through 2008. (The company's fiscal year N runs from February of year N to January of N+1.) They revealed that the company lost about $1 billion during that period. In February 2011, the company announced that due to this effort, its report for fiscal 2009 would be delayed, and also that it was restructuring into four independent business units and focusing much of its emphasis on billing systems for mobile carriers. Layoffs also resumed, with more possibly in the offing.
In March 2011, revenues for fiscal 2009 were announced at $1.58 billion, down from $1.72 billion two years previously, with an overall loss of $273.3 million. Dahan stepped down as CEO. During his tenure, Comverse Technology stock fell 68 percent in price and 2,000–2,500 employees were laid off; he made more than $20 million during that time and gained payments of some $5 million upon his departure. Overall, his stint as leader of the company was not regarded positively by some in the Israeli business press.
The new CEO was Charles Burdick, who had been non-executive chairman of the company. Burdick became the first American to head the company.
In April 2011, the company agreed to a $2.8 million settlement with the U.S. government over violations of the Foreign Corrupt Practices Act
that had taken place between 2003 and 2005. Payments of $536,000 had been made to the Hellenic Telecommunications Organization in order to obtain purchase orders and had been inaccurately reported as sales commissions in Comverse's accounting.
In June 2011, results for fiscal 2010 were announced, finally bringing the company current with its annual audited reporting. Revenues rose to $1.63 billion while the company's net loss was halved to $132.3 million, and the cash position was now stated as being sufficient to meet foreseeable needs. Another positive sign for its recovery came when it was re-listed on NASDAQ in September 2011.
Israel
The State of Israel is a parliamentary republic located in the Middle East, along the eastern shore of the Mediterranean Sea...
, is a technology
Technology
Technology is the making, usage, and knowledge of tools, machines, techniques, crafts, systems or methods of organization in order to solve a problem or perform a specific function. It can also refer to the collection of such tools, machinery, and procedures. The word technology comes ;...
company located in Woodbury, New York
Woodbury, Nassau County, New York
Woodbury is a hamlet located within the town of Oyster Bay in Nassau County, New York, United States. The population was 8,907 at the 2010 census...
in the United States
United States
The United States of America is a federal constitutional republic comprising fifty states and a federal district...
, that develops and markets telecommunications software. The company focuses on providing value-added services to telecommunication service providers, in particular to mobile network operators. Comverse Technology has several wholly or partly owned subsidiaries. The name "Comverse" is a fusion of the words "communication" and "versatility".
Founded in 1982, the company went public on the Nasdaq Stock Market in 1986. Led by co-founder and CEO Jacob "Kobi" Alexander
Kobi Alexander
Jacob "Kobi" Alexander is the founder and the former CEO of New York-based Comverse Technology. In 2006, he was charged with multiple counts of fraud and related offenses pertaining to irregularities in trading of Comverse stock; he subsequently fled to Namibia, a nation which has no extradition...
, the company originally specialized in centralized hardware systems for voice and fax messaging and sold them to telecommunications companies and other large enterprises. Much of its funding came from Israeli government subsidies and tax credits provided to research and development for hi-tech firms. By the mid-1990s, one of its most successful products allowed legal authorities and intelligence agencies to record and store data collected from intercepted communications. Starting in the late 1990s, Comverse's voice messaging software became its main product and the company grew rapidly with the surge in mobile phone use, passing the $1 billion mark in revenues. It established a formidable position in the worldwide mobile voicemail
Voicemail
Voicemail is a computer based system that allows users and subscribers to exchange personal voice messages; to select and deliver voice information; and to process transactions relating to individuals, organizations, products and services, using an ordinary telephone...
management market and sold a popular short message service center
Short message service center
A short message service center is a network element in the mobile telephone network which delivers SMS messages.-Operation:When a user sends a text message to another user, the message gets stored in the SMSC which delivers it to the destination user when they are available...
product. While headquartered in the US, most of the company's research and development has been done in Israel; Comverse became one of the more visible success stories in Israel's hi-tech industry
Science and technology in Israel
Science and technology in Israel is one of the country's most developed sectors. The percentage of Israelis engaged in scientific and technological inquiry, and the amount spent on research and development in relation to gross domestic product , is amongst the highest in the world...
. It has been one of Israel's largest employers of software engineer
Software engineer
A software engineer is an engineer who applies the principles of software engineering to the design, development, testing, and evaluation of the software and systems that make computers or anything containing software, such as computer chips, work.- Overview :...
s, was closely followed in the nation's business press, and was the first Israeli-associated company to join the S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
index.
In 2006, Comverse was involved in an options backdating
Options backdating
Options backdating is the practice of issuing options contracts on a later date than that which the options have listed. While options backdating is not, in and of itself, an illegal practice, intentional backdating that coincides with low underlying stock prices and accounting reports that claim...
scandal. Alexander and two other top executives were charged in the US with multiple counts of conspiracy, fraud, money laundering and making false filings. Alexander fled the country to Namibia
Namibia
Namibia, officially the Republic of Namibia , is a country in southern Africa whose western border is the Atlantic Ocean. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March...
where he has been fighting extradition ever since. The scandal proved difficult for Comverse Technology to recover from; the company was delisted from Nasdaq, removed from the S&P 500, and spent the next several years consumed by the costly need to restate its financial reports for several years. Additionally affected by the financial crisis of 2008 and on and changes in the mobile phone market, the company underwent several rounds of large-scale layoffs and sold off parts of its business. By 2011 there were signs that the company was poised for a turnaround.
Subsidiaries
Comverse Technology has, or has had, multiple subsidiaries:- Comverse, also known as Comverse Network Systems or Comverse CNS, is a provider of software and systems enabling value-added services for voice, messaging, mobile Internet and mobile advertisingMobile advertisingMobile advertising is a form of advertising via mobile phones or other mobile devices. It is a subset of mobile marketing.- Overview :...
; converged billingConvergent chargingConvergent charging and billing , is a solution in the telecommunications industry that enables common management of all users and all services for operators....
and active customer management; and IP communications. Comverse's solutions support flexible deployment models, including in-network, hosted and managed services, and can run on circuit-switchedCircuit switchingCircuit switching is a methodology of implementing a telecommunications network in which two network nodes establish a dedicated communications channel through the network before the nodes may communicate. The circuit guarantees the full bandwidth of the channel and remains connected for the...
, IPInternet ProtocolThe Internet Protocol is the principal communications protocol used for relaying datagrams across an internetwork using the Internet Protocol Suite...
, IMSIP Multimedia SubsystemThe IP Multimedia Subsystem or IP Multimedia Core Network Subsystem is an architectural framework for delivering Internet Protocol multimedia services. It was originally designed by the wireless standards body 3rd Generation Partnership Project , as a part of the vision for evolving mobile...
, and converged networkConvergence (telecommunications)Telecommunications convergence, network convergence or simply convergence are broad terms used to describe emerging telecommunications technologies, and network architecture used to migrate multiple communications services into a single network...
environments. Comverse's customer base spans more than 130 countries and covers over 500 communication service providers serving more than two billion subscribers. It has typically provided some 70 percent of Comverse Technology's overall revenue. Comverse has 100 local offices in 40 countries, with its corporate headquarters located in Wakefield, MassachusettsWakefield, Massachusetts-History:-Geography:The diagram above shows what is to the east, west, north, south, and other directions of the center of Wakefield. Towns with population above 25,000 are in bold italics.-Demographics:-Notable residents:...
in the US. - Verint Systems (which, from 1999 to 2002, was known as Comverse Infosys) is a provider of solutions for analysis of intercepted communications, digital video-focused security and surveillance, and analyticsAnalyticsAnalytics is the application of computer technology, operational research, and statistics to solve problems in business and industry. Analytics is carried out within an information system: while, in the past, statistics and mathematics could be studied without computers and software, analytics has...
and business intelligenceBusiness intelligenceBusiness intelligence mainly refers to computer-based techniques used in identifying, extracting, and analyzing business data, such as sales revenue by products and/or departments, or by associated costs and incomes....
for the enterprise. Their products are aimed to enable government and enterprises to make sense of the vast information they collect to meet performance and security goals. Verint solutions are used by more than 10,000 organizations in 150 countries. Verint is headquartered in Melville, New YorkMelville, New YorkMelville is a hamlet and census-designated place in the town of Huntington in Suffolk County on Long Island, New York, in the United States. As of the 2000 census, 14,533 people resided there.-Location:...
, with offices worldwide and 2500 employees around the globe. By 2011, Verint was 52 percent owned by Comverse Technology. - Ulticom provides signaling solutions for wireless, wireline, and Internet communications. Ulticom's products are used by telecommunication equipment and service providers worldwide to deploy mobility, location, payment, switching, and messaging services. Ulticom is headquartered in Mount Laurel, New Jersey, with additional offices in the United States, Europe, and Asia. Comverse acquired Ulticom in 1996 and sold it in 2010.
- Startel sells integrated voice, data and networking solutions for use in call centers worldwide. It was originally an independent company that was acquired by Comverse Technology in 1992.
- StarhomeStarhomeStarhome is a global mobile roaming solutions provider. The company has historically focused on providing international roaming solutions for voice and data to wireless operators using the Global System for Mobile Communication, or GSM standard, the most popular standard for mobile phones in the...
provides roaming services for mobile network operators. The Starhome portfolio includes international roaming services and core network solutions across various technologies, including intelligent networkIntelligent networkThe Intelligent Network , is the standard network architecture specified in the . It is intended for fixed as well as mobile telecom networks...
s and next-generation networks. It is fully owned by Comverse Technology. - ComSor was a venture capitalVenture capitalVenture capital is financial capital provided to early-stage, high-potential, high risk, growth startup companies. The venture capital fund makes money by owning equity in the companies it invests in, which usually have a novel technology or business model in high technology industries, such as...
operation, created as a subsidiary in partnership with Soros Fund ManagementSoros Fund ManagementSoros Fund Management LLC is an American, privately held, hedge fund management firm founded in 1969 by George Soros. In 2010 it was reported to be one of the most profitable firms in the hedge fund industry, averaging a 20% annual rate of return over four decades.-Overview:Soros Fund Management...
, that invested in start-up companies directly and was active in the late 1990s and early 2000s.
Origins
The company's origins date to 1982 (or 1983, sources differ), when three Israelis, aspiring investment banker Jacob "Kobi" AlexanderKobi Alexander
Jacob "Kobi" Alexander is the founder and the former CEO of New York-based Comverse Technology. In 2006, he was charged with multiple counts of fraud and related offenses pertaining to irregularities in trading of Comverse stock; he subsequently fled to Namibia, a nation which has no extradition...
of Shearson Loeb Rhoades, engineer Boaz Misholi, and Alexander brother-in-law and Columbia University
Columbia University
Columbia University in the City of New York is a private, Ivy League university in Manhattan, New York City. Columbia is the oldest institution of higher learning in the state of New York, the fifth oldest in the United States, and one of the country's nine Colonial Colleges founded before the...
computer science professor Yechiam Yemini, got together and founded an Israeli start-up company, Efrat Future Technologies Ltd. In a meeting in New York, Misholi had the idea of building a business around centralized hardware systems to support voice and fax messaging and selling them to telecommunications companies and other large enterprises, who could then resell the voice and fax services to their customers. The three quickly returned to Israeli and started the company, with the goal of securing Israeli government grants to fund the research and development work.
The early years of the company were difficult; in 1984, they founded Comverse in the United States, which became the parent company of Efrat. The name "Comverse" was chosen as a fusion of the words "communication" and "versatility".
In 1986 Comverse went public on the Nasdaq Stock Market with a $20 million valuation; the company used the money so gained as its final round of funding. The three founders had trouble working with each other, and Yemini divorced Alexander's sister; in 1987, Alexander was left with sole control of the company after the other two pulled out. The company was a penny stock
Penny stock
In the United States, penny stocks are common shares of small public companies that trade at less than $1.00. In some countries, similar shares of stock are known as cent stocks.-Concerns for investors:...
on the edge of collapse.
Early successes
Under his lead, Alexander was credited with turning around Comverse's fortunes. In 1989, the Ascom GroupAscom Group
Ascom Group is the largest oil and gas company in Moldova. The company has commercial operations in Kazakhstan, Turkmenistan and Sudan and produces around 500,000 tonnes of oil/year and around 1.3 billion m3 of natural gas/year....
made a $6 million direct investment in the company. In 1990, Comverse won a potentially $10 million contract, its largest yet, to deliver computers running voicemail and fax applications on West German cellular networks, beating out far larger corporations in the process. Deutsche Telekom
Deutsche Telekom
Deutsche Telekom AG is a telecommunications company headquartered in Bonn, Germany. It is the largest telecommunications company in Europe....
became one of the company's biggest early customers. By 1991, the company had annual sales of $17 million and was selling a combined voice and fax mailbox system. Many of its early successes came from avoiding the huge telecommunications companies in the U.S. and instead focusing on selling to small- and medium-sized companies in the wireless market in Europe. The company also sought a variety of other markets, including developing countries such as Mexico and China for its Trilogue virtual telephone service. Gradually its product emphasis shifted more from hardware to software.
While headquartered in the U.S., nearly all its manufacturing was done in Israel, where it was able to substantially benefit from government subsidies and tax credits provided to research and development for hi-tech firms and industries by the Office of the Chief Scientist in the Ministry of Trade and Industry
Industry, Trade and Labour Minister of Israel
The Industry, Trade and Labour Minister of Israel is the political head of the Israeli Ministry of Industry, Trade and Labour and a position in the Israeli cabinet....
and by the Israel-U.S. Binational Industrial Research and Development Foundation. Many other Israeli companies were built by the same model, including another top software company, Mercury Interactive
Mercury Interactive
Mercury is now part of Hewlett-Packard. The combination of Mercury Interactive and HP OpenView formed HP Software Division, a global business unit within HP Enterprise Business...
. During the 1990s, Comverse received at least 69 research and development grants from the OCS program.
In 1993, the company reported a 341 percent rise in profits on revenues in the $64 million range and was named a "Company to Watch" by Fortune
Fortune (magazine)
Fortune is a global business magazine published by Time Inc. Founded by Henry Luce in 1930, the publishing business, consisting of Time, Life, Fortune, and Sports Illustrated, grew to become Time Warner. In turn, AOL grew as it acquired Time Warner in 2000 when Time Warner was the world's largest...
magazine. However its stock plunged for a while in 1994 after a disappointing earnings report.
By 1995, Comverse was best known for its AudioDisk product, which was sold to overseas clients and allowed legal authorities and intelligence agencies to record and store data collected from wiretaps. Half the company's revenues at that point were from AudioDisk, and market analysts were recommending Comverse's stock.
Growth with wireless
Comverse became a market leader in voice messaging software and boomed during the late 1990s with the surge in mobile phone use. Much of its market focus was on wireless operators and overseas companies, and it gained a formidable position in the worldwide mobile voicemail management market. The growth coincided with SMSSMS
SMS is a form of text messaging communication on phones and mobile phones. The terms SMS or sms may also refer to:- Computer hardware :...
text messages becoming popular; the first big application for SMS was as a notification mechanism to tell a wireless subscriber that voicemail were stored in a voicemail box. Comverse expanded this application into a full-blown short message service center
Short message service center
A short message service center is a network element in the mobile telephone network which delivers SMS messages.-Operation:When a user sends a text message to another user, the message gets stored in the SMSC which delivers it to the destination user when they are available...
(SMSC), which receives, buffers, processes, and dispatches all SMS messages throughout a mobile network. Comverse branded and productised this as the Intelligent Short Message Service Center, or ISMSC. Typical of telecomm software, it ran on Unix
Unix
Unix is a multitasking, multi-user computer operating system originally developed in 1969 by a group of AT&T employees at Bell Labs, including Ken Thompson, Dennis Ritchie, Brian Kernighan, Douglas McIlroy, and Joe Ossanna...
-based platforms, such as UnixWare
UnixWare
UnixWare is a Unix operating system maintained by The SCO Group . UnixWare is typically deployed as a server rather than desktop. Binary distributions of UnixWare are available for x86 architecture computers. It was originally released by Univel, a jointly owned venture of AT&T's Unix System...
and later Linux
Linux
Linux is a Unix-like computer operating system assembled under the model of free and open source software development and distribution. The defining component of any Linux system is the Linux kernel, an operating system kernel first released October 5, 1991 by Linus Torvalds...
. Comverse's ISMSC found success as a lower-price solution for lower-traffic networks, where it competed with Logica's Telepath solution. Other companies in the SMSC space included CMG
CMG (company)
CMG was a consulting company focused on telecommunications and computing and based in London, United Kingdom. It was once a constituent of the FTSE 100 Index but was acquired by Logica in 2002.-History:...
and Openwave
Openwave
Openwave is a software company. Based in Redwood City, California, USA, Openwave is historically significant in its introduction of the Mobile Internet and its expansion into a large successful mobile software supplier in the mobile telecom sector...
. ISMSC found considerable market penetration, exemplified by all six of Hong Kong
Hong Kong
Hong Kong is one of two Special Administrative Regions of the People's Republic of China , the other being Macau. A city-state situated on China's south coast and enclosed by the Pearl River Delta and South China Sea, it is renowned for its expansive skyline and deep natural harbour...
's wireless carriers using it.
Comverse also became a participant in forming international wireless standards, such as in 2001 for the Speech Application Language Tags
Speech Application Language Tags
Speech Application Language Tags is an XML based markup language that is used in HTML and XHTML pages to add voice recognition capabilities to web based applications.-Description:...
(SALT) markup language for XML
XML
Extensible Markup Language is a set of rules for encoding documents in machine-readable form. It is defined in the XML 1.0 Specification produced by the W3C, and several other related specifications, all gratis open standards....
to add voice capabilities to web-based applications. Additional industry standards groups in which Comverse has been active include the Open Mobile Alliance
Open Mobile Alliance
The Open Mobile Alliance is a standards body which develops open standards for the mobile phone industry.- Principles :Mission: To provide interoperable service enablers working across countries, operators and mobile terminals....
and TM Forum
TM Forum
The TeleManagement Forum formerly the Network Management Forum, is an international non-profit industry association, for service providers and their suppliers in the information industry, the telecommunications industry and the entertainment industry.Members include telephone companies, cable...
.
In addition to growing organically, Comverse Technology began acquiring other companies in both Israel and the U.S. It acquired Dale, Gesek, McWilliams, & Sheridan, later known as DGM&S Telecom, in 1996 and renamed it Ulticom in 1999. Comverse Technology acquired one of its key rivals, Boston Technology, for $843 million in stock in 1997. The acquisition gave Comverse entree into the large U.S. telecommunications market and meant Comverse would be supplying voice messaging systems to 12 of the world's top 20 carriers, and left it the third-largest supplier after Lucent and Northern Telecom. In 1999, as it saw record earnings, Comverse formed two wholly owned subsidiaries, Comverse Network Systems and Comverse Infosys, representing the telecommunications services platforms and products and the digital monitoring and recording products, respectively.
By 2000, its revenues were $1.2 billion and it had global operations. It continued to aggressively acquire small companies to fill out its technologies, as exemplified by the purchase of Loronix, Gaya Software, and Exalink, all within a 30-day period in 2000. The company's stock price rose from around $10 in late 1998 to over $120 in early 2001. The company was able to raise money several times on Nasdaq, including once for its Ulticom subsidiary and once (at a valuation of $600 million) shortly before the Dot-com bubble
Dot-com bubble
The dot-com bubble was a speculative bubble covering roughly 1995–2000 during which stock markets in industrialized nations saw their equity value rise rapidly from growth in the more...
burst.
Comverse was one of the most prominent and profitable success stories in Israel's hi-tech industry
Science and technology in Israel
Science and technology in Israel is one of the country's most developed sectors. The percentage of Israelis engaged in scientific and technological inquiry, and the amount spent on research and development in relation to gross domestic product , is amongst the highest in the world...
, with both Haaretz
Haaretz
Haaretz is Israel's oldest daily newspaper. It was founded in 1918 and is now published in both Hebrew and English in Berliner format. The English edition is published and sold together with the International Herald Tribune. Both Hebrew and English editions can be read on the Internet...
and The Jerusalem Post
The Jerusalem Post
The Jerusalem Post is an Israeli daily English-language broadsheet newspaper, founded on December 1, 1932 by Gershon Agron as The Palestine Post. The daily readership numbers do not approach those of the major Hebrew newspapers....
referring to it as a flagship of that industry. As CEO, Alexander was sought out for meetings in Tel Aviv
Tel Aviv
Tel Aviv , officially Tel Aviv-Yafo , is the second most populous city in Israel, with a population of 404,400 on a land area of . The city is located on the Israeli Mediterranean coastline in west-central Israel. It is the largest and most populous city in the metropolitan area of Gush Dan, with...
by world leaders such as Chinese President Jiang Zemin
Jiang Zemin
Jiang Zemin is a former Chinese politician, who served as General Secretary of the Communist Party of China from 1989 to 2002, as President of the People's Republic of China from 1993 to 2003, and as Chairman of the Central Military Commission from 1989 to 2005...
. He became known, as Bloomberg News later stated, as "the wizard of Israel's technology boom"; his oft-stated goal was for Comverse to do for Israel what Nokia
Nokia
Nokia Corporation is a Finnish multinational communications corporation that is headquartered in Keilaniemi, Espoo, a city neighbouring Finland's capital Helsinki...
had done for Finland
Finland
Finland , officially the Republic of Finland, is a Nordic country situated in the Fennoscandian region of Northern Europe. It is bordered by Sweden in the west, Norway in the north and Russia in the east, while Estonia lies to its south across the Gulf of Finland.Around 5.4 million people reside...
. Comverse was one of the largest employers of software engineer
Software engineer
A software engineer is an engineer who applies the principles of software engineering to the design, development, testing, and evaluation of the software and systems that make computers or anything containing software, such as computer chips, work.- Overview :...
s in Israel and its stock was widely held among the Israeli investing public; as a consequence, the successes and failures of Comverse were always followed closely in the country's financial press. (Amdocs
Amdocs
Amdocs Limited is a provider of software and services for billing, customer relationship management , operations support systems...
and Mercury Interactive
Mercury Interactive
Mercury is now part of Hewlett-Packard. The combination of Mercury Interactive and HP OpenView formed HP Software Division, a global business unit within HP Enterprise Business...
were two other prominent Israeli companies in the enterprise software sector that were also closely followed.)
The company was also quintessentially Israeli in how it was run, with Comverse CEO Ze'ev Bregman in particular favoring a loose, relaxed system in which he knew all the employees and lines of management reporting were frequently bypassed. When Comverse Technology joined the S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
index in 1999, it was the first Israeli-associated company ever to do so. It set the same mark when it joined the NASDAQ-100
NASDAQ-100
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
index.
The early 2000s recession
Early 2000s recession
The early 2000s recession was a decline in economic activity which occurred mainly in developed countries. The recession affected the European Union mostly during 2000 and 2001 and the United States mostly in 2002 and 2003. The UK, Canada and Australia avoided the recession for the most part, while...
led to some struggles for Comverse Technology, with the global economic downturn leading to publicly announced profit warnings and a plunge in the stock price in July 2001. Over 3,000 jobs were cut during the period as part of several restructuring efforts.
The company still made some acquisitions, such as buying the instant messaging
Instant messaging
Instant Messaging is a form of real-time direct text-based chatting communication in push mode between two or more people using personal computers or other devices, along with shared clients. The user's text is conveyed over a network, such as the Internet...
specialist Odigo for $20 million in 2002, after having previously purchased a 12 percent stake in it in 2001.
The image of Comverse Technology as Israel's blue-chip hi-tech stock suffered, and led to a slide in several other large Israeli technology firms. Comverse's management was criticized by analysts for having issued over-optimistic forecasts, although many other Israeli firms in the industry did even worse or failed completely during this period.
In addition, the European market for mobile voicemail management was already saturated by 2002 and the prepaid wireless market was in decline. In 2002, Comverse Infosys changed its name to Verint, partly to separate its more thriving business from Comverse's struggles, and staged a modestly successful IPO of a minority portion of its stock. By 2002, Comverse Technology had more than 5,000 employees across nearly 40 countries; due to the partial spinoffs and economic difficulties, revenues were down to $735 million.
In December 2001, a Fox News report raised the concern that wiretapping equipment provided by Comverse Infosys to the U.S. government for electronic eavesdropping may have been vulnerable, as these systems allegedly had a back door through which the wiretaps could be intercepted by unauthorized parties. Fox News reporter Carl Cameron
Carl Cameron
Carl Cameron is an American television journalist and commentator for Fox News Channel.-Early life and education:As a child Cameron spent several years in Iran, where his father worked as an archaeologist....
said there was no reason to believe the Israeli government was implicated, but that "a classified top-secret investigation is underway". A March 2002 story by Le Monde recapped the Fox report and concluded: "Comverse is suspected of having introduced into its systems of the 'catch gates' in order to 'intercept, record and store' these wire-taps. This hardware would render the 'listener' himself 'listened to'." Fox News did not pursue the allegations, and in the years since, there have been no legal or commercial actions of any type taken against Comverse by the FBI or any other branch of the US Government related to data access and security issues. While no real evidence has been presented against Comverse or Verint, the allegations have become a favorite topic of conspiracy theorists.
By 2005, the company had $959 million in sales and employed over 5,000 people, of whom about half were located in Israel. That country held most of the research and development workers, many of whom occupied the company's seven buildings on HaBarzel in the Ramat HaHayal district of Tel Aviv
Tel Aviv
Tel Aviv , officially Tel Aviv-Yafo , is the second most populous city in Israel, with a population of 404,400 on a land area of . The city is located on the Israeli Mediterranean coastline in west-central Israel. It is the largest and most populous city in the metropolitan area of Gush Dan, with...
, while business and marketing operations were stationed in the company's Woodbury, New York headquarters.
Options backdating and improper accounting
In 2006, Comverse Technology was involved in an options backdatingOptions backdating
Options backdating is the practice of issuing options contracts on a later date than that which the options have listed. While options backdating is not, in and of itself, an illegal practice, intentional backdating that coincides with low underlying stock prices and accounting reports that claim...
scandal. In May of that year, company founder and CEO Jacob Alexander stepped down from his position. Alexander, finance chief David Kreinberg, and former senior general counsel William Sorin (both of whom had also stepped down) were charged in July 2006 in the United States District Court for the Eastern District of New York
United States District Court for the Eastern District of New York
The United States District Court for the Eastern District of New York is the federal district court whose jurisdiction comprises the entirety of Long Island and Staten Island...
with multiple counts of conspiracy, fraud, money laundering and making false filings to the Securities and Exchange Commission (SEC), all related to alleged options backdating or other actions related to stock options between 1998 and 2006. The accusations against the three included the backdating of options to when Comverse stock had been trading at low prices, the use of fake names of option holders, and the creation of secret funds in which to hold the illicit gains. The SEC also filed civil charges against the three, for filing false annual and quarterly financial reports and proxy statements from 1991 to 2005.
By then, Alexander had already fled the country and was classified a wanted fugitive in August 2006 by the US Federal Bureau of Investigation
Federal Bureau of Investigation
The Federal Bureau of Investigation is an agency of the United States Department of Justice that serves as both a federal criminal investigative body and an internal intelligence agency . The FBI has investigative jurisdiction over violations of more than 200 categories of federal crime...
. On 27 September 2006, he was arrested in Namibia
Namibia
Namibia, officially the Republic of Namibia , is a country in southern Africa whose western border is the Atlantic Ocean. It shares land borders with Angola and Zambia to the north, Botswana to the east and South Africa to the south and east. It gained independence from South Africa on 21 March...
after hiding in Windhoek
Windhoek
Windhoek is the capital and largest city of the Republic of Namibia. It is located in central Namibia in the Khomas Highland plateau area, at around above sea level. The 2001 census determined Windhoek's population was 233,529...
with his family, where he had bought a house at a country club. If extradited to the US and convicted, he faced 25 years in prison.
He was released on bail and subsequently engaged in a long, and so far successful, battle to avoid extradition to the US (in Namibia neither money laundering nor options backdating is a crime). Upon leaving the US he had transferred some $64 million to Israel, with most of that ending up in Namibia; another $50 million was blocked by the US government, which overall sought the forfeiture of $138 million of Alexander's assets. In April 2010, Alexander won a victory in the Supreme Court of Namibia
Supreme Court of Namibia
The Supreme Court of Namibia is the supreme court in all matters under Namibian law. It is the court of last resort and highest appellate court in the country. It is located in the centre of the capital Windhoek.-History:...
that allowed him to continue to live and work in that country until the extradition request is finally ruled upon. In November 2010, Alexander agreed to pay the U.S. government $53.6 million to settle the SEC's case against him, with those monies being targeted to settle assorted lawsuits against Comverse by shareholders.
Of the other two executives, William Sorin pleaded guilty to criminal charges and was sentenced to a year in prison in 2007. David Kreinberg cooperated with prosecutors, repaid $2.4 million to the SEC, and in 2011 was sentenced to the "time served" of the minimal period he had originally been in custody. While over a hundred companies were investigated or charged with options backdating, Comverse was one of the most known cases, and in the words of a pair of financial writers, "Comverse was the poster child for stock option fraud."
Continuing difficulties
The scandal proved difficult for Comverse Technology to recover from. The three charged executives, who had stayed on as consultants, were fired without severance pay, and the company said it would pursue legal action against them. The board of directors was expanded from five to ten, with all of the new ones being Americans rather than Israelis. A new CEO, Andre Dahan, came on board in April 2007 but the ongoing management crisis prevented the company from engaging in new innovation or entering new business areas. Despite the 2006-2007 economic climate being one of growth, layoffs occurred in mid-2007. Research analysts began speculating that the company might break up.Because of the accounting issues from the option backdating, Comverse Technology was unable to file full or timely financial reports with the SEC. Its stock was delisted from the Nasdaq Stock Market on 1 February 2007, and removed from the S&P 500
S&P 500
The S&P 500 is a free-float capitalization-weighted index published since 1957 of the prices of 500 large-cap common stocks actively traded in the United States. The stocks included in the S&P 500 are those of large publicly held companies that trade on either of the two largest American stock...
and Nasdaq-100
NASDAQ-100
The NASDAQ-100 is a stock market index of 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index. The companies' weights in the index are based on their market capitalizations, with certain rules capping the influence of the largest components...
at the same time. The stock now trades on the Pink Sheets
Pink Sheets
OTC Markets Group, Inc., informally known as "Pink Sheets", is a private company that provides services to the U.S. over-the-counter securities market including electronic quotations, trading, messaging, and information platforms. According to the U.S. Securities and Exchange Commission, OTC...
. In 2009, the SEC settled its case with Comverse Technology; the company would not be subject to penalty fines over the backdating matter, but would accept a permanent injunction against itself regarding any future violations of law regarding publicly traded companies. A settlement in a similar case against Ulticom was also reached. The failure to file timely financial reports put the company at risk of having its stock registration revoked; a process deciding this, involving the SEC and an Administrative Law Judge
Administrative law judge
An administrative law judge in the United States is an official who presides at an administrative trial-type hearing to resolve a dispute between a government agency and someone affected by a decision of that agency. The ALJ is usually the initial trier of fact and decision maker...
, is still active of 2011.
The financial crisis of 2008 and on caused further difficulties for Comverse Technology, with new layoffs occurring in October 2008, March 2009, and August 2009. The company reportedly lost considerable money in 2009, and the moves were typical of other hi-tech companies caught in the bad economic environment. Some of Comverse's products were still viewed highly; a Yankee Group
Yankee Group
Yankee Group, a Massachusetts company, sells advice and market-research information relating to information technology.-History:Founded in 1970, the Yankee Group emerged as the first independent technology research and consulting firm...
survey ranked them first in the world in their type of billing services, and they were the worldwide market-share leaders in providing multimedia message service centers to wireless carriers. However, the rise in popularity of smartphone
Smartphone
A smartphone is a high-end mobile phone built on a mobile computing platform, with more advanced computing ability and connectivity than a contemporary feature phone. The first smartphones were devices that mainly combined the functions of a personal digital assistant and a mobile phone or camera...
s and of sending e-mail
E-mail
Electronic mail, commonly known as email or e-mail, is a method of exchanging digital messages from an author to one or more recipients. Modern email operates across the Internet or other computer networks. Some early email systems required that the author and the recipient both be online at the...
eroded the carrier market for some of Comverse's products and services. By 2009, the company's upper management was now largely American rather than Israeli, Dahan was under internal criticism, and there were frequent clashes regarding company culture.
By early 2010, Comverse Technology was planning to finally release an annual report with full financial statements and return to being fully listed on Nasdaq, but still was anticipating more layoffs.
One piece of positive news in July 2010 was an $80 million investment by well-known entrepreneur George Soros
George Soros
George Soros is a Hungarian-American business magnate, investor, philosopher, and philanthropist. He is the chairman of Soros Fund Management. Soros supports progressive-liberal causes...
.
However, the promised financial reports did not come, and an August 2010 public announcement that the company was short on cash and planning more layoffs and was subject to its stock being completely delisted caused a precipitous drop in the stock's price, with the market valuation of the company falling below $1 billion. CEO Dahan said simply, "These are challenging times."
By August 2010, analysts were stating that Comverse Technology might have to break up by selling off its subsidiaries and spin off Comverse's own business units. Running low on cash, Comverse Technology engaged Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
to explore such possibilities, with several large, well-known technology companies potentially interested in Comverse and some private equity firms possibly interested in Verint.
The company had some 4,000 employees, and continued having about half of them employed in Israel and most of the rest in the US and France. The continuing financial reporting problems had cost the company some $500 million in accountants' fees and related costs since 2006 and was the largest drain on its cash position.
The fact that senior management awarded itself bonuses in a time of various rounds of layoffs left employees feeling outraged. Comverse's restructuring also affected its 2006-acquired NetCentrex business unit in France, with layoffs or a shutdown possible. In October 2010, Comverse Technology agreed to sell its two-thirds ownership of its Ulticom subsidiary to a U.S. private equity firm for $90 million; the deal closed in December 2010. The company also sold part of its holdings in Verint, netting $80 billion, and sold for $27 million land in the hi-tech area of Ra'anana
Ra'anana
Ra'anana is a city in the heart of the southern Sharon Plain of the Central District of Israel with a population of 68,300, . Ra'anana is bordered by Kfar Sava on the east and Herzliya on the southwest...
, north of Tel Aviv, where it had been planning to build a new headquarters.
In October 2010, Comverse Technology finally published its restated financial reports for fiscal years 2005 through 2008. (The company's fiscal year N runs from February of year N to January of N+1.) They revealed that the company lost about $1 billion during that period. In February 2011, the company announced that due to this effort, its report for fiscal 2009 would be delayed, and also that it was restructuring into four independent business units and focusing much of its emphasis on billing systems for mobile carriers. Layoffs also resumed, with more possibly in the offing.
In March 2011, revenues for fiscal 2009 were announced at $1.58 billion, down from $1.72 billion two years previously, with an overall loss of $273.3 million. Dahan stepped down as CEO. During his tenure, Comverse Technology stock fell 68 percent in price and 2,000–2,500 employees were laid off; he made more than $20 million during that time and gained payments of some $5 million upon his departure. Overall, his stint as leader of the company was not regarded positively by some in the Israeli business press.
The new CEO was Charles Burdick, who had been non-executive chairman of the company. Burdick became the first American to head the company.
In April 2011, the company agreed to a $2.8 million settlement with the U.S. government over violations of the Foreign Corrupt Practices Act
Foreign Corrupt Practices Act
The Foreign Corrupt Practices Act of 1977 is a United States federal law known primarily for two of its main provisions, one that addresses accounting transparency requirements under the Securities Exchange Act of 1934 and another concerning bribery of foreign officials.- Provisions and scope...
that had taken place between 2003 and 2005. Payments of $536,000 had been made to the Hellenic Telecommunications Organization in order to obtain purchase orders and had been inaccurately reported as sales commissions in Comverse's accounting.
Hopes for recovery
During the first half of 2011, analysts such as Oppenheimer & Co., J.P. Morgan and Barclays said that with its accounting problems largely behind it, some restructuring done, and an improving cash balance and some revenue growth, Comverse Technology was well-positioned for ongoing operations or a possible sale. Zacks Investment Research predicted the company would again show a profit for fiscal year 2011. Comverse itself had gained tens of millions in new business, was hiring again in modest numbers, and was at about 4,000 employees, including some on an outsourcing basis.In June 2011, results for fiscal 2010 were announced, finally bringing the company current with its annual audited reporting. Revenues rose to $1.63 billion while the company's net loss was halved to $132.3 million, and the cash position was now stated as being sufficient to meet foreseeable needs. Another positive sign for its recovery came when it was re-listed on NASDAQ in September 2011.
Industry recognition
Over the years, Comverse Technology has won a number of awards within its industry, including:- 2002 – Technology Marketing Corporation's Product of the Year (for Verint's Ultra IntelliMiner)
- 2004 – CMP Media's Product of the Year (for Verint's Ultra Intelligent Recording)
- 2004 – CDMA Development Group's Innovative Solutions Award (for Comverse's Multimedia Messaging Service Center)
- 2005, 2006, 2007, 2008, 2009 – Frost and Sullivan's Telecom BSS Vendor of the Year award (for Comverse's business support systems in the Asia Pacific region)
- 2007 – International Engineering Consortium's Best VoIP Product or Service Award (for Comverse's Converged IPCentrex solution)
- 2007 – Technology Marketing Corporation's IMS Leadership Award (for Comverse's Converged Messaging Solution)
- 2007 – International Engineering Consortium's InfoVision Awards for Best New Product (for Comverse's Converged Billing Suite)
- 2007 – Technology Marketing Corporation's Internet Telephony Excellence Award (for Comverse's MyCall Converged Communications product)
- 2009, 2010 – Technology Marketing Corporation's Internet Telephony BSS/OSS Excellence Award (for Comverse's ONE Billing & Active Customer Management package)
- 2010 – Virgo Publishing's Excellence Award for Best Cost Management Implementation (for Comverse's Business Support System product)