Amdocs meets guidance, sees mixed signals from the market

Amdocs Ltd. kept its promises this week as it released first-quarter earnings near the high end of its guidance, but offered little evidence of a change in market conditions for telecom.

Amdocs reported quarterly revenues of $339.4 million, a 19.7% decrease from last year’s first quarter. However, the company generated $68 million in free cash flow and increased its cash balance to $1.128 billion.

“Given the difficult market conditions, we are pleased with this result,” said Dov Baharav, CEO at Amdocs.

He added that the market for business systems in the telecom industry remains tough. “Our customers and prospects remained hesitant to commit on new deals,” Baharav said.

However, SBC didn’t hesitate to award Amdocs with a seven-year, multimillion-dollar outsourcing deal. Amdocs will provide computer systems and maintenance for SBC’s directory companies, which publish the SBC Smart Yellow Pages in 13 states and other SBC electronic products.

“This strengthens our position in the outsourcing market,” Baharav said.

CFO Ron Moskovitz said revenue from the company’s recently established outsourcing division, which was about 10% last year, would grow to a percentile in the high teens this year.

Amdocs closed four other deals in the quarter. In addition to the SBC deal, it will deploy its Amdocs Mobile solution for a Latin American operator and its ClarifyCRM solution for a workforce management project with a European carrier. The company also won a billing consolidation project and sold its payment solutions module to a North American operator.

The outlook for the rest of the year is still unclear, Baharav said. “It is difficult to say if the market has hit bottom yet. We might see additional softness, but the pace of reduction will be slower.”