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Report Date : |
28.10.2014 |
IDENTIFICATION DETAILS
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Name : |
COMVERSE LTD. |
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Formerly Known As : |
COMVERSE NETWORK SYSTEMS LTD., |
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Registered Office : |
P.O. Box 43096 (6143002), 29 Habarzel Street,
Ramat Hahayal, Tel Aviv 6971041 |
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Country : |
Israel |
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Financials (as on) : |
31.07.2014 |
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Date of Incorporation : |
23.12.1982 |
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Legal Form : |
Private Limited Company |
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Line of Business : |
Software developers, designers, manufacturers,
exporters and marketers of software-based products, systems and related
services |
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No of Employees : |
2,000 |
RATING & COMMENTS
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MIRA’s Rating : |
B |
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RATING |
STATUS |
PROPOSED CREDIT LINE |
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26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
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Status : |
Moderate |
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Payment Behaviour : |
Slow but correct |
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Litigation : |
Clear |
NOTES :
Any query related to this report can be made on
e-mail : infodept@mirainform.com
while quoting report number, name and date.
ECGC Country Risk Classification List – June 1, 2014
|
Country Name |
Previous Rating (31.03.2014) |
Current Rating (01.06.2014) |
|
Israel |
A2 |
A2 |
|
Risk Category |
ECGC
Classification |
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Insignificant |
A1 |
|
Low |
A2 |
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Moderate |
B1 |
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High |
B2 |
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Very High |
C1 |
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Restricted |
C2 |
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Off-credit |
D |
ISRAEL - ECONOMIC
OVERVIEW
Israel has a technologically
advanced market economy. Cut diamonds, high-technology equipment, and
pharmaceuticals are among the leading exports. Its major imports include crude
oil, grains, raw materials, and military equipment. Israel usually posts sizable
trade deficits, which are covered by tourism and other service exports, as well
as significant foreign investment inflows. Between 2004 and 2011, growth
averaged nearly 5% per year, led by exports. The global financial crisis of
2008-09 spurred a brief recession in Israel, but the country entered the crisis
with solid fundamentals, following years of prudent fiscal policy and a
resilient banking sector. In 2010, Israel formally acceded to the OECD.
Israel's economy also has weathered the Arab Spring because strong trade ties
outside the Middle East have insulated the economy from spillover effects. The
economy has recovered better than most advanced, comparably sized economies,
but slowing demand domestically and internationally, and a strong shekel, have
reduced forecasts for the next decade to the 3% level. Natural gas fields
discovered off Israel's coast since 2009 have brightened Israel's energy
security outlook. The Tamar and Leviathan fields were some of the world's
largest offshore natural gas finds this past decade. The massive Leviathan
field is not due to come online until 2018, but production from Tamar provided
a one percentage point boost to Israel's GDP in 2013 and is expected to
contribute 0.5% growth in 2014. In mid-2011, public protests arose around
income inequality and rising housing and commodity prices. Israel's income
inequality and poverty rates are among the highest of OECD countries and there
is a broad perception among the public that a small number of
"tycoons" have a cartel-like grip over the major parts of the
economy. The government formed committees to address some of the grievances but
has maintained that it will not engage in deficit spending to satisfy populist
demands. In May 2013 the Israeli government, in a politically difficult
process, passed an austerity budget to reign in the deficit and restore
confidence in the government's fiscal position. Over the long term, Israel
faces structural issues, including low labor participation rates for its
fastest growing social segments - the ultra-orthodox and Arab-Israeli
communities. Also, Israel's progressive, globally competitive, knowledge-based
technology sector employs only 9% of the workforce, with the rest employed in
manufacturing and services - sectors which face downward wage pressures from
global competition.
|
Source
: CIA |
COMVERSE LTD.
Telephone 972
3 645 22 22
Fax 972
3 645 25 07
P.O. Box 43096 (6143002)
29 Habarzel Street
Ramat Hahayal
TEL AVIV 6971041 ISRAEL
A private limited company, incorporated as per
file No. 51-095816-8 on the 23.12.1982.
Originally registered under the name EFRAT
FUTURE TECHNOLOGY LTD.
Following the strategic reorganization of COMVERSE
Group, changed its name to COMVERSE NETWORK SYSTEMS LTD., which changed to the
present name on the 15.05.2001. The move included a split in subject’s
activities and the establishment of former sister company, COMVERSE INFOSYS
LTD. (VERINT today), as of the 20.01.1999.
On the 12.03.2001 NATOLOGI LTD. was merged into
subject.
Authorized share capital NIS 1,000.00, divided
into -
1,000 ordinary shares of NIS 1.00 each,
of which 265 shares amounting to NIS 265.00 were
issued.
Subject is almost fully owned by COMVERSE INC.,
a public limited company whose shares are traded on the NASDAQ Global Market
(NASDAQ:CNSI).
Until 31.10.2012 COMVERSE INC. was a fully owned
subsidiary of COMVERSE TECHNOLOGY INC. (hereafter CTI) whose shares were also
traded on NASDAQ Exchange (symbol CMVT). CTI went through a major structural
re-organization, splitting its holdings which included the sale (via shares
distribution) of COMVERSE INC, which as of 01.11.2012 became an independent
company and started trading on NASDAQ. CTI also sold another smaller
subsidiary, and in February 2013 CTI and its (former) subsidiary VERINT SYSTEMS
INC. (VSI) made a share swap merger (all part of the move - see more in CHARACTER).
1. Thomas
B. Sabol, CFO of COMVERSE INC.,
2. Shawn
C. Rathje,
3. Roy
S. Luria,
4. Avishai
Algaria.
Phillipe Tartavull, President & CEO of
COMVERSE INC.
Software developers, designers, manufacturers, exporters
and marketers of software-based products, systems and related services that (i)
provide prepaid, postpaid and converged billing and active customer management
for wireless, wireline and cable network operators (“Business Support Systems”
or “BSS”); and (ii) enable wireless and wireline network-based Value-Added
Services (“VAS”), comprised of three categories – Voice, Messaging and Mobile
Internet.
Customers are over 450 communication service
providers in some 125 countries.
Among customers: AOL GERMANY, BRITISH TELECOM,
ECONET GROUP, FRANCE TELECOM, KPN, MTN GROUP, O2 GROUP, TELEFONICA GLOBAL, TIM,
T-MOBILE GROUP, VIMPLECOM, VODACOM GROUP, VODAFONE GROUP, AT&T, BELLSOUTH,
CINGULAR WIRELESS, SPRINT NEXTEL, TELEFONICA, TELMEX, VERIZON WIRELESS, CHINA
MOBILE, CHINA TELECOM, SINGTEL, SMART, TAIWAN MOBILE, TELSTRA, etc.
Among local suppliers: RADVISION, M.H.M. FASTENERS, TRANS ELECTRIC, AVIV
PCB, DATA J.C.E., M&M ELECTRONICS M.S.M., R.H. ELECTRONICS, TEL - AD
ELECTRONICS, EASTRONICS, RISCO, E & M COMPUTING, etc.
Operating from COMVERSE Group local headquarters
leased premises, in 29 Habarzel Street, Ramat Hahayal Industrial & Hi-Tech
Zone, Tel Aviv, and from additional offices in nearby 21-23 Habarzel Street, in
all subject operates from 40,305 sq. meters in Israel. Also operate from
COMVERSE INC. corporate headquarters located in Wakefield, MA, USA and from 90
local offices in over 40 countries worldwide.
According to a report from September 2014 having
some 2,000 employees, of which some 700 employees in Israel.
During the recent years COMVERSE and subject
went through several rounds of dismissals of over 1,000 employees, over 50% of
which in Israel, as part of the Group's re-organization. In the beginning of
2013, COMVERSE dismissed some 120 employees, of which 30 in Israel. As reported
in October 2013, further several tens employees will be laid-off, due to end of
projects.
In September 2014 it was reported that COMVERSE
will lay-off further 500 employees, some 200 from Israel.
As of October 31st
2013 subject had a US$ 20 million line of credit, US$ 16.4 million utilized.
Subject’s financial data is included in parent,
COMVERSE INC. (subject is practically comprising COMVERSE INC Group's activity)
consolidated B/S, which shows:
US$
(thousands)
31.07.2014 31.01.2014
ASSETS
Current assets
Cash
and cash equivalents 181,587 254,580
Restricted
Cash and Bank deposits
63,650 34,343
Accounts
receivable, net 106,465 89,361
Inventories
22,011 16,166
Prepaid
expenses and other current assets 44,150
35,509
417,863 429,959
Property and equipment, net
47,335 41,541
Goodwill and other intangible assets 154,443 155,499
Other assets 85,497 121,838
705,138 748,837
======== ========
LIABILITIES
Current liabilities 408,680 410,924
Non-current liabilities 296,151 305,103
Equity (in deficit) 307 32,810
705,138 748,837
======== ========
Some financial data concerning the former Group
structure, where CTI controlled the Group: In August 2010 CTI announced it
expects cash flow problems, and in order to overcome it, in September 2010 it
sold a real estate property for US$ 28.5 million. In addition, CTI gained US$
56 million from selling its (66%) shares of ULTICOM in October 2010, and US$ 80
million from selling shares (5%) of VERINT in January 2011. The Group went
through major re-organization and efficiency moves which showed good
results.
In August 2012 CTI sold its 69% shares in
STARHOME for US$ 54 million.
COMVERSE INC. current market value US$ 466
million.
Subject’s backlog as of 31.01.2011 was US$ 1,173
million.
Subject is an “Approved Enterprise” and as such
entitled for State support and tax relief. The Israeli Investment Centre (IIC)
approved investment plans for subject’s plants expansion of US$ 1.2 million,
US$ 6.5 million and US$ 3.5 million in 1997, 2000 and 2003, respectively, plus
NIS 16.3 million grant in 2002.
There are 2 charges for the total sum of US$
35,000,000 registered on the company's assets (financial assets), in favor of
Bank Hapoalim Ltd. and Bank Leumi Le’Israel Ltd. (last charge placed July
2011).
COMVERSE INC. sales (for Fiscal Year Ended on 31st
January of next year):
2009 sales were US$ US$ 798,821,000, making an
operating loss of
US$ 214,216,000, ending with a net loss
of US$ 37,749,000.
2010 sales were US$ US$ 862,836,000, making an
operating loss of
US$ 59,776,000, ending with a net loss of
US$ 89,915,000.
2011 sales were US$ US$ 771,157,000, making an
operating profit of
US$ 11,442,000, ending with a net loss of
US$ 12,887,000.
2012 sales were US$ US$ 677,763,000, making an
operating loss of
US$ 2,192,000, making a net profit of US$
6,248,000.
2013 sales were US$ US$ 652,501,000, making an
operating profit of
US$ 37,699,000, making a net profit of US$
18,686,000.
Sales for the first 6 months of 2014 (ending
31.07.14, year ending 31.01.15) were US$ 234,452,000 (28% decrease compared to
parallel period of 2013), making an operating loss of US$ 20,499,000 and
a net loss of US$ 32,997,000.
COMVERSE INC. (CNS), 100%, parent company, also
having other subsidiaries worldwide, besides subject.
According to our:
Bank Hapoalim Ltd., Business Central Branch (No.
600), Tel Aviv.
Bank Leumi Le’Israel Ltd., Tel Aviv Central
Branch (No. 800), Tel Aviv.
Note: Since we could not speak to subject's officials, we are unable to
verify a/m bank details.
In the beginning of 2006 the SEC begun
investigations against COMVERSE TECHNOLOGY INC (CTI) in suspicions of stocks
felonies regarding frauds in handling of options that CTI issued in previous
years. The "backdating" affair led to pressing charges by the SEC to
the New York District Court in August 2006 against 3 former senior officials,
the main one being subject's founder and until then the long serving chairman
and CEO of CTI, Jacob (Kobi) Alexander. The other 2 are the CFO and another
company director. All three resigned in 2006.
Criminal lawsuits were filed for frauds
estimated at millions of US$, which went to the defendants pockets. Mr.
Alexander was announced "fugitive" after not appearing in the Court
(now in legal extradition process in Namibia and is seeking an agreement with
the Federal Prosecutors).
In December 2009 CTI finally signed an
arrangement in the matter of the class action submitted in the New York Court
by investors. According to the agreement, the investors will receive
compensations in value of US$ 225 million, of which CTI will pay US$ 165
million and the reminder will be financed privately by Mr. Alexander.
From 2006 until October 2010 CTI did not submit
annual reports (10-K) to SEC, due to the "backdating" affair, which
complicated all the accounts. As a result, CTI's shares were de-listed from the
main list in Nasdaq and moved to the "Pink Sheets. After many delays and
extensions periods on 04.10.2010 CTI published its annual 2009 report including
the SEC revised 2005-2008 statements. CTI shares returned to trade on Nasdaq in
September 2011.
All above affected subject's and other CTI
subsidiaries activities in practice. The estimated expenses by CTI to-date due
to the affair to the CPA and Law firms was over US$ 500 million, besides other
aspects that incurred heavy damages. CTI Group has to go through a wide
re-organization and structural changes, as briefly described above, and ended
in CTI splitting is subsidiaries by selling ULTICOM and STARHOME, spin-off of
CONVERSE INC. and a transaction where on 04.02.2013 VERINT completed its
acquisition CTI in a merger transaction (whereby CTI was merged with and into a
wholly-owned subsidiary of VERINT) and CTI shares ceased trading that same day.
Currently, under mediation, is a claim of CTI
former employee regarding affairs related to the financial entanglement of
former parent company CTI, initially filed as a motion for class action lawsuit
(the class certification motions did not specify an amount of damages).
In September 2014 COMVERSE reported that an
investigation on behalf of current long-term investors in shares of COMVERSE
INC was launched concerning potential breaches of fiduciary duties.
Subject's officials refused to disclose
information.
COMVERSE has been a leading company in the world
in their fields, serving leading network operator customers worldwide.
Professionally it has a very good reputation. It has the largest global market
share for providing Multimedia Messaging Centers (MMSC) to global telecom
carriers and considered the largest in the world in value-added services and
billing solutions to Telco’s.
Notable acquisition along the years:
In 1998 CTI acquired BOSTON TECHNOLOGY INC., for
US$ 858 million and merged its activities within subject.
In 1999, CTI acquired AMAREX TECHNOLOGY INC.
In 2000 CTI acquired Israeli start-up EXALINK
LTD. for US$ 224 million (in stocks) and of LORONIX INFORMATION SYSTEMS, INC.
of the USA for US$ 224 million (in stocks).
In 2002 subject acquired Israeli start-up ODIGO
for a sum of US$ 17 million.
In 2006 subject acquired French NETCENTREX S.A.,
for US$173 million in cash, and privately-held company NETONOMY for US$19
million in cash.
In 2007: 3 deals in total value of tens of US$
millions, the largest of which with MOVILNET of Venezuela (billing solutions),
and VAS to LITECOM of Switzerland and P&T LUXEMBOURG; A US$ 20 million
continuation contract for ALLTEL WIRELESS (N. America), providing real-time
billing solutions for pre-paid clients.
In 2008: Tens of millions deal, supplying MTS of
Russia and CIS countries billing solutions; Supply for Israeli BEZEQ switches
for its
In 2011: MIRS-HOT (a local telecom operator)
chose subject to operate its system, deal valued at NIS 60 million.
In May 2012 subject signed an agreement with
BLUE SQUARE REAL ESTATE to move to a new premises (rented), on an area of some
25,000 sq. meters, in Ra'anana Industrial Zone. The move is expected to take
place in October 2014. Annual rent fees are approx. US$ 5.1 million.
According to the Israel Association of Electronics
& Software, Hi-Tech industries sales in 2013 summed up to US$ 27.3 billion,
over 6% rise from 2012 (then sales were US$ 25.6 billion, up from US$ 24.8
billion in 2011 and US$ 23.5 billion in 2010). 2013 sales divided into export
of US$ 22.86 billion (US$ 21.48 billion, US$ 20.99 billion & US$ 19.87
billion in 2012, 2011 & 2010, respectively) and US$ 4.4 billion of sales to
the local market (US$ 4.1 billion, US$ 3.9 billion & US$ 3.6 billion in
2012, 2011 & 2010, respectively).
The division of Israel's Hi-Tech companies by
production in 2011: 34% Software, 30% Industrial Equipment & Components,
19% Civilian Communications & Telecommunications, 10% Defense Systems, 8%
Medical Systems.
Breakdown of export in 2011 showed 3.4% increase in
Electronic Components & Computers, and 3.9% increase in Communications,
Medical & Scientific Equipment.
According to the Central Bureau of Statistics (CBS)
sales for export from the manufacture of computers, electronic & optical
products in 2013 were US$ 11,636 million, compared to US$ 10,987 million in
2012 and US$ 11,036 million in 2011. Division of export was: 50% to Asia, 20%
to USA, 15% - EU, 15% to the rest of the world.
According to CBS, import of raw materials
for the local Machine and Electronics Manufacturing in 2013 fell by 1.3% from
2012, reaching US$ 9,842 million (fall was deeper in local NIS currency – by
7.7%). This occurred after a growth trend over the last 3 years: by 8.5%, 12%
and 20% rise 2012, 2011 and 2010 (in US$ terms), respectively. In the first 8
months of 2014 import increased by 2.2% compared to the parallel period in 2013
in $ terms (fell 2.3% in NIS terms).
Investments (capital formation) in imported machinery and other
equipment (M&E) by the hi-tech industries in the branches of computers,
electronic and optical production in 2013 fell by 55.4% from 2012, reaching NIS
2,552.5 million, continuing the negative trend in 2012, when investment fell by
30.5% from 2011.
We figure subject is going to meet its
obligations in the near future, therefore credits may be granted, perhaps on
relatively low volumes. Yet, considering the financial situation and losses, we
prefer to remain cautious and recommend dealings on secured basis.
Note: Since February 2013 Israel Post has started using a new area code
method of 7 digits (the old method of 5 digits is no longer valid).
FOREIGN EXCHANGE RATES
|
Currency |
Unit
|
Indian Rupees |
|
US Dollar |
1 |
Rs.61.23 |
|
|
1 |
Rs.98.53 |
|
Euro |
1 |
Rs.77.75 |
INFORMATION DETAILS
|
Analysis Done by
: |
DIV |
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|
Report Prepared
by : |
SMN |
RATING EXPLANATIONS
|
RATING |
STATUS |
PROPOSED CREDIT LINE |
|
|
>86 |
Aaa |
Possesses an extremely sound financial base with the strongest capability
for timely payment of interest and principal sums |
Unlimited |
|
71-85 |
Aa |
Possesses adequate working capital. No caution needed for credit
transaction. It has above average (strong) capability for payment of interest
and principal sums |
Large |
|
56-70 |
A |
Financial & operational base are regarded healthy. General
unfavourable factors will not cause fatal effect. Satisfactory capability for
payment of interest and principal sums |
Fairly Large |
|
41-55 |
Ba |
Overall operation is considered normal. Capable to meet normal
commitments. |
Satisfactory |
|
26-40 |
B |
Capability to overcome financial difficulties seems comparatively
below average. |
Small |
|
11-25 |
Ca |
Adverse factors are apparent. Repayment of interest and principal sums
in default or expected to be in default upon maturity |
Limited with
full security |
|
<10 |
C |
Absolute credit risk exists. Caution needed to be exercised |
Credit not
recommended |
|
-- |
NB |
New Business |
-- |
This score serves as a reference to assess
SC’s credit risk and to set the amount of credit to be extended. It is calculated
from a composite of weighted scores obtained from each of the major sections of
this report. The assessed factors and their relative weights (as indicated
through %) are as follows:
Financial
condition (40%) Ownership
background (20%) Payment record
(10%)
Credit history
(10%) Market trend (10%) Operational size
(10%)
This report is issued at your request without any
risk and responsibility on the part of MIRA INFORM PRIVATE LIMITED (MIPL)
or its officials.