[September 09, 2006]

Comverse Buys Netonomy

By David Sims

TMCnet Contributing Editor

Comverse, a subsidiary of Comverse Technology (News - Alert), Inc., who sells software and systems enabling network-based multimedia enhanced communication and billing services, has announced that it has completed its acquisition of privately-held Netonomy for approximately $19 million in cash, subject, as usual, to certain post-closing adjustments.

Netonomy, is a customer self-service, bill analysis and point of sale products vendor. The move, Comverse officials say, is to extend their real-time billing and customer management products for communication service providers with "additional tools to increase efficiency and enhance the end-customer experience."

Howard Woolf, President Comverse Converged Billing Solutions Group, said this latest acquisition is "part of our commitment to provide the most comprehensive and innovative solutions to the communications industry."

Earlier this week Comverse announced the launch of Quad Play Suite, described by company officials as "a pre-integrated package combining IPTV (News - Alert) middleware with fixed-mobile voice and video communication applications."

The Quad Play Suite uses IP Multimedia Subsystem (News - Alert) (IMS) architecture for service convergence across wireless, wireline and cable networks, and gives a way for service providers to enter the quad play market.

The announcement is part of Comverse's focus on converged IP communications, specifically its recent acquisition of Netcentrex (News - Alert), a vendor of Class 5 application servers with 4 million VoIP lines in commercial service, as well as its portfolio of VoIP, IP Centrex, Triple Play and IMS products.

Comverse is fighting NASDAQ delisting as well -- on Tuesday, two weeks before their latest deadline to file their financial reports, Comverse requested the Nasdaq Listing and Hearing Review Council grant yet another deferral, this time for 60 days, according to the Israeli industry observer Roee Bergman.

Comverse, Bergman reported, "has until September 25 to complete the restatements of its financial statements and to file its annual report for the fiscal year ended January 31, 2006 and quarterly report for the quarter ended April 30, 2006, but may not be able to meet the deadline."

NASDAQ officials have said there's no assurance the extension will be granted, or that the company will remain listed on NASDAQ.

And as Business Week has noted, "Comverse is one of nearly 80 companies under scrutiny by the Securities and Exchange Commission or Department of Justice for possible backdating of stock-option grants." Three former executives have been charged.

The SEC said two of the executives, Comverse's founder and former Chairman and CEO Jacob "Kobi" Alexander, and David Kreinberg, Comverse's former Chief Financial Officer, also created a slush fund of backdated options by causing options to be granted to fictitious employees and, later, used these options to recruit and retain key personnel.

As the SEC put it, "the former executives collectively realized millions of dollars of ill-gotten compensation through the exercise of illegally backdated option grants and the subsequent sale of Comverse common stock."

The backdated option grants and secret option slush fund was "a deceit of the highest order upon Comverse Technology Inc.'s shareholders," said Linda Thomsen, Director of the SEC's Division of Enforcement.

Industry observer Marcy Gordon explains that in backdating, "options are issued retroactively to coincide with low points in a company's share price, a practice that can fatten profits for options recipients when they sell their shares at higher market prices. Backdating options can be legal as long as the practice is disclosed to investors and properly approved by the company's board. In some cases, however, the practice can run afoul of tax laws."

David Sims is a contributing editor for TMCnet. For more articles please visit David Sims’ columnist page.

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