Goldman Sachs: Recent 23% drop in Comverse price unwarranted

Investment bank Goldman Sachs claims that Comverse Technology's (Nasdaq:CMVT) sharp 23% drop over the last two weeks is unwarranted, and is due to concerns about telecom sector spending, rather than to company performance.

The bank said that the current share price constitutes a "compelling entry point based on valuation and near-term news flow, which should be more positive than negative."

Based on talks with Comverse management, analysts Elan Zivotofsky, Rajiv Das, Abe Finkelstein, and Shimon Levy expect the company will post improved backlog in the fourth quarter. The analysts believe Comverse will meet projections just as it did in preceding quarters, and may even beat them.

The analysts write that Comverse has developed an advanced version of its voice mailbox, beating its main rival Lucent Technologies (NYSE:LU). The analysts add that the products could generate $100 million to $200 million revenue over the coming two to three years.

The analysts expect that ATT Wireless will convert to 2.5G to 3.G networks, using Comverse systems in place of its Lucent systems. The question is not if but when Comverse will win contracts from Lucent customers, the analysts note.

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