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In a research update, Merrill Lynch expressed concerns about the disruption of AT&T Wireless' deal to buy unified-messaging technology from Comverse Technologies (Nasdaq:CMVT).

Although the analysts granted Comverse a Neutral rating, they do not rule out the company's talented management leading it to safer shores through changing its business model.

While other analysts confined themselves to speculating whether the deal will ultimately be carried out, Merrill chose to see it as a harbinger of possible cancellations to come.

The deal has been put off after Comverse proved unable to solve certain technological glitches. AT&T is not committed to an exclusive relationship with Comverse, hence it could elect to buy the UM technology from another company, such as Openwave (OPWV).

Merrill Lynch is worried that while Comverse irons out its wrinkles, it could wind up losing business to Openwave or other rivals in UM technology.

To date voicemail services have generated 90% to 95% of Comverse's income. Analysts Ilana Treston, Tal Lianu and Michael Ching see that as a problem, because the VM market is nearing saturation, especially in Comverse's home turf of Europe.

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Theoretically Comverse could expand in the United States at the expense of Lucent Technologies (NYSE:LU). But the analysts do not see enterprises replacing one voicemail platform for another, especially in these harsh economic times.

The main challenge Comverse faces in the foreseeable future, they write, is to sustain its levels of voicemail-generated revenue from wireless subscribers. They do not see any of Comverse's other activities replacing lost VM revenue for the time being.

Comverse is also active in short-messaging services, or SMS. Although its one of the five biggest players in SMS, the field is still controlled by Logica and London- and Amsterdam-listed CMG Wireless Data Solutions, leaving Comverse to supply third-rank wireless communications providers.

Moreover, although the SMS market is expected to grow in the next two or three years, it is expected to slow as competing technologies such as UM become available.

Although Comverse has a management with a history of achievement, Merrill Lynch writes, it will be challenged to find new growth opportunities within its core business, assuming that VM does shrink.

Merrill's worst-case scenario is third-quarter revenue of $295 million and earnings of 11 cents per share, assuming VM income contracts by 25%. In such case Comverse's price target should slump to $10 or $11.