Comverse Technology (Nasdaq:CMVT) on Tuesday said that its third-quarter results were in line with amended guidance.
Revenue was $295 million. Profit excluding one-time charges dropped to $20.1 million or 11 cents per share, 70% down from the parallel of $318 million pre-charges profit.
Net profit was $68.4 million or 38 cents per share.
Operating profit fell to $10 million, against $65 million in the parallel.
One-time charges after tax, relating to investment write-downs, came to $18.4 million.
Its announcement yesterday details the cost-cutting measures announced in October. Comverse is laying off 900 workers, or 15% of its workforce. It expects to post one-time severance charges of $60 million in the fourth quarter.
Chairman and CEO Kobi Alexander said that Comverse had to make painful moves in order to adjust to market conditions, including the 15% staff cut. The measures will save Comverse $70 million a year, he said, which will help counterbalance various charges on restructuring.
The company said its order backlog and advance payments declined, though it did not cite numbers. It did admit that customers are delaying projects.
Despite various travails, Comverse said, it has not reduced its R&D spending, which came to $76.2 million in the third quarter. For the nine months its R&D budget was $221 million, far more than that of its rivals, the company gloated.
Comverse ended the third quarter with $1.7 billion cash and cash equivalents, and $2 billion capital.
Q4 EPS expected to drop 45%
However, it expects the weakness to persist in the fourth quarter and in 2002 as enterprises continue to defer system installations and replacement of legacy systems.
Comverse predicts fourth-quarter revenue falling 10% against the third quarter to $265 million. It foresees the situation improving only in the second quarter of 2002, to $270 million.
Even then growth will stay slow, it warns, rising to $275 million in the third quarter of 2002 and $290 million in the fourth quarter. Revenue for the year 2002 is expected at $1.1 billion.
Comverse expects Q4 EPS of 6 cents, half its result of the third quarter. For Q1 2002 it expects EPS to rise to 13 cents, inching up to 14 cents in Q2, 15 cents in Q3 and 18 cents in Q4.
EPS for 2002 is expected to come to 60 cents.
Robertson Stephens predicts much the same - 70 cents EPS for 2002.
Analyst updates after Comverse's profit warning said that the company is at a crossroads: its traditional voicemail market has matured and it needs to find alternative growth venues.
Comverse has been expanding into unified messaging systems. But Merrill Lynch suggests that the future of this technology as a growth engine is unproven. It suggests that the Israeli company change its business model if it wants to find a safe harbor.
Meanwhile, voicemail comprises 85% of revenue. Comverse reportedly remains confident that unified messaging and other added-value services will prove a substantial growth engines in the future.