For the past four years, we thought that the worst had already happened at Comverse Technology Inc. (Pink Sheets: CMVT), the formerly giant Israeli software company. The flight of the company's founder and its life and soul, Kobi Alexander, to Namibia, in the wake of the options backdating scandal, seemed like a low point from which the company could, and should, find the upward path again.
However, sometimes the downward slope is more slippery than it seems. On August 13, Comverse published a difficult announcement. It turned out that Comverse, which has still not managed to file restated financials with the US Securities Exchange Commission, was running out of cash. In the absence of proper financial statements, it is hard to put one's finger on the causes, but nearly $1.5 billion have evaporated from the company's coffers in the past four years, leaving it with $327 million, which will not be enough for it to get through the coming year.
The direct implication is another wave of layoffs. After shedding 2,500 employees in the past three years, Comverse will shed hundreds more, many of them from its activity in Israel, in the near future Beyond that, the company officially announced that it was putting assets up for sale through Goldman Sachs. The assets in question are subsidiaries CNS, Verint Systems Inc. (Pink Sheets: VRNT), Ulticom Inc. (Pink Sheets: ULCM), and Starhome, over which there has been speculation for some time that they were about to be sold.
But besides the practical consequences, there is also a painful perception of the company's management, led by CEO Andre Dahan and the board. Comverse's financials for the past three years indicate that it has spent close to $500 million on restating its financials, an incomprehensible sum, most of which found its way into the pockets of the lawyers and accountants working on the restatement.
The silence of the management and the board, and the fact that Dahan continues to hold on to office, given what looks like another scandal (even if this time it only looks like a big oversight), indicate that Comverse's further decline towards a sad end is inevitable.
Published by Globes [online], Israel business news - www.globes-online.com - on August 22, 2010
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