Jul 12, 2001 12:00 PM,

Comverse revises 2001 guidance

By Chris Sewell

Shares in Comverse Technology regained some of its loss today after the telecom software maker said it would not meet Wall Street estimates for the remainder of 2001.

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The company pointed to the deteriorating economic climate and the negative impact it has had on capital spending and customer purchases as causes.

Comverse stock dipped Wednesday morning 38% from a Tuesday close of $39.02 to $23.93 though it regained 1.5% today, after it warned investors late Tuesday of revised guidance for the current second quarter, as well as the third and fourth fiscal quarters.

Compared to Thomson Financial/First Call’s analyst earnings consensus of 43 cents per share for the second quarter, Comverse said it now expects earnings of 28 cents per share on revenue of $345 million. The revised guidance excludes a previously announced one-time, $9 million restructuring charge and a $15 million investments write-down.

Additionally, the company said it anticipates third quarter earnings of 20 cents per share and fourth quarter earnings of 23 cents per share. First Call estimates projected Comverse would post 45 cents and 48 cents per share respectively. For the year, the company reset earnings per share guidance at $1.14 per share compared to Wall Street’s original $1.79 per share.

Though it’s stock has taken a beating, Comverse has thus far fared better than others caught in the industry’s financial maelstrom, beating earnings estimates for 28 consecutive quarters. The reason, said J.P. Morgan equity analyst Reginal King, is the high-margin enhanced services like *69 and voice mail the company helps provide.

“This company serves a basic need for the telco industry,” King said. “Comverse is one of those few companies that allows telcos to deliver those high margin services to customers.”

King added that Comverse’s revised guidance is a “worst case analysis” the company put forth to guard itself against an unknown financial future.

“If you’ve got a problem now, you clearly have to reset the bar,” King said.