(By Fred Dunsel) Last week Comverse Technology, Inc. (CTI) (NASDAQ:CMVT) appeared to have arrested its downward trajectory by eking out a second consecutive weekly gain. Closing at $5.78 on Friday, the stock rose by 0.6% in the course of the week, providing a much welcomed respite from a decline which first began in late March when it peaked at $6.87. Since then, it has fallen by over 16%. CTI is also currently down 14.9% for the year.
In early June, CTI's wholly-owned subsidiary, Comverse, posted a surprise quarterly loss due to a delay in recognizing revenue. Contrary to initial expectations of posting a profit, the subsidiary posted a loss of 15 cents per share instead. CTI Chief Executive Charles Burdick attributed Comverse's financial results to "the timing of revenue recognition and collection milestone triggers, and the impact of our business transformation launched last year." Actually, CTI has previously disclosed to its shareholders its intentions to spin off the Comverse subsidiary. The recent appointment of Philippe Tartavull as Comverse's CEO only gave greater credence to the notion that CTI would be selling off the former soon.
Given the above, analysts are now wondering if CTI, which is a key provider of software and systems for businesses with a wide US and international customer base, has been oversold in recent weeks. They note that the company also holds a majority stake in surveillance products manufacturer Verint Systems Inc., a workforce optimization company that had recently posted a 13% increase in sales. Analysts believe that CTI could maximize shareholder value by either putting Verint up for sale or merging its existing businesses with Verint, although a successful implementation of this strategy would still take some time. In addition, referring to CTI's "favorable" risk/reward ratio, RBC Capital believes that the company's stock still has much upside over current levels, giving it a $9 price target and an "outperform" rating.