Amdocs Ltd. (NYSE: DOX) is becoming a hot item on Wall Street. How do they put it? The writing was on the wall, but no one could read it, and few bothered to look at the right wall.
Remember what C. Michael Armstrong, the man called upon in 1997 to save AT&T (NYSE:T), said. In essence, he said the US consumer would not want to enter into negotiations with different providers for each type of telecommunications. He said consumers would want a single provider for all types of telecommunications; one address. Armstrong launched a campaign to turn AT&T into the ultimate provider. To do this, AT&T had to be able to provide consumers with voice, picture, and content via all in every way that consumers wanted, and of course, with the best service terms possible at the lowest price. Armstrong was unable to reach the finish line because of a lack of resources and of technology. The slump in demand since 2000 seriously hurt AT&T, and Armstrong, who was absolutely correct in everything he said, was forced to leave.
At the end of his famous speech in 1997, when Armstrong accurately prophesied current developments in broadband and all that, he was asked how AT&T would handle customers’ bills. To the best of my recollection, he had no answer.
The so-called new economy has given us wise men the possibility of understanding that the hardest and most important part of the economy would be the interface between the consumer and the ultimate provider. In other words, the answer to the question how the ultimate provider will be able to bill its customers, when they use every communications channel being offered. Just as I am now convinced that alternative energy will catch on strongly, just as I am convinced that advanced technologies are greatly improving water use, and just as I can predict developments in medical equipment from what is happening in technology, I should have spotted back then what Amdocs is giving the telecommunications industry, and have realized that this Israeli company is offering solutions to problems that no one before it could solve.
It is not yet too late to climb aboard the Amdocs train, because the company is developing and adapting itself to progress in the IT revolution. Amdocs does not rely on speed, since developments in telecommunications are still unclear, but it is trying to stay a step ahead of developments. Although everyone is now sure that the provider for the ultimate telecommunications provider is being created, it’s hard to determine who the standard will be and when it will happen. Since I have no doubt that this vision will become a reality, I conclude that it is worthwhile to hold onto Amdocs shares through all the upswings and downswings that will occur. 22 analysts cover the company, and at the end of July none of them gave it a “Sell” recommendation, despite the surge in its share since late last year and again since mid-July.
At a time when fear is the constant in the forecasting equations, it turns out that a company like Amdocs is beginning to be perceived as a company for whom future developments in telecommunications are tailored. The company’s actions indicates that the management, especially since Dov Baharav took over as CEO, understood exactly how the telecommunications revolution was leading to, and the needs that it would create, and prepared accordingly.
If you look closely and understand what Amdocs is doing, you’ll conclude that the company has built itself up so that every giant competing for the title of comprehensive telecommunications services provider will consider, when establishing a strategic system, whether it is worthwhile going it alone at immense cost, or paying an admittedly high price to Amdocs because it is clear that Amdocs will do a better job. in through its hard but professional and efficient way, has been able to persuade the telecommunications industry, especially the leaders, that it has developed for them an integrated customer management (ICM) system. ICM means the ability to integrate all the variables needed to establish large service systems. Amdocs basically tells the giants: Let us handle your customers. We’ll fill the gap between you and them - service on one side and billing on the other - and we’ll do it with maximum efficiency.
A week ago, Tom Tauli wrote on The Motley Fool, “Amdocs ... has done something that's been fairly tough for companies in its sector to do in 2006 - generate a positive return... As telecom companies add more services, it is important that they can offer a seamless customer experience, and that's where Amdocs comes in.”
Tauli believes that Amdocs is the leader in a niche so that it always emerges the winner, whether the market is better or worse.
I think that it is still not too late for investors in Amdocs. I’d like for the share to go down a bit, but for long-term investors the time is now.
Did you notice what happened to Orckit Communications Ltd. (Nasdaq: ORCT; TASE: ORCT)? Why did the share rise? It rose because of a rumor, which has been around since the share hit a low point, by the way. The rumor might be right, but it has nothing to do with the Israeli company’s current business circumstances. The rumors say that Cisco Systems Inc. (Nasdaq:CSCO) is about to buy Orckit. Yesterday’s rise was solely due to the acquisition of M-Systems Flash Disk Pioneers Ltd. (Nasdaq: FLSH), and was unrelated to any business event on the part of Orckit. It was pure speculation. The only important thing for me is to explain again and again to anyone buying Orckit on a day like yesterday that they must understand that it’s a roulette chip. In contrast, anyone who bought Orckit the day before can say that he or she bought the share because of the quality of the company.
Published by Globes [online], Israel business news - www.globes.co.il - on August 1, 2006
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