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Timing Is Everything: Comverse Warning Beats Downgrade by a Nose

Dan Bernstein

Last night, Morgan Stanley Dean Witter analyst David Raezer downgraded Comverse Technology(CMVT) to neutral from strong buy "based on the absence of near-term catalysts and because shares look fully valued based on our revised estimates."

His decision came before the company blew up this morning. But most investors didn't have a chance to learn about Raezer's research until about an hour after Comverse's preannouncement. The analyst had lowered his full-year earnings estimates to $1.57 a share, but that's still well above the company's new guidance of $1.14 a share. The consensus estimate is $1.79.

Jumping in after the fact, Credit Suisse First Boston's Susan Passoni cut her rating today on Comverse to hold from buy, and WR Hambrecht's Peter Friedland cut the stock to neutral from buy based on "the company's pre-announcement of substantially lower 2001 and 2002 revenue and EPS expectations."

While Comverse has taken a beating today, dropping 33% to $26.13, competitor Openwave Systems(OPWV) has been along for the ride, losing 14.2% to $20.74.