Subject: [NEXTEL-1] Nextel to nix Comverse?

From: Marcel <[email-masked]>
Date: Wed, 11 Dec 2002 01:30:50 -0500

Nextel to nix Comverse?

After Comverse refused to cut prices by 30%, Nextel looks set to pick Unisys instead.
Hadass Geyfman   28 Oct 02   20:10

Sources inform ''Globes'' that major US communications provider Nextel Communications
(Nasdaq; XETRA:NXTL) is expected to cancel a voice mail contract with Comverse in favor of
Unisys of France. Comverse is a subsidiary of Comverse Technology (Nasdaq: CMVT).
The deal, closed in late 2001, priced each voice mailbox at between $7 and $8. Given the
current communications market trend, where existing contracts are reopened and
renegotiated, Nextel asked Comverse to lower the price by 30% to $5-$6 per voice mailbox.
Comverse refused. Nextel decided to issue a tender, and selected Unisys, the runner-up in
the original tender offer, instead.

Losing the Nextel contract could have far reaching effects, as Nextel has a good number of
South American subsidiaries; the gateways to those markets could open to Unisys and close
to Comverse.

The renegotiating phenomenon includes reopening maintenance and service contracts. As a
result, a sharp drop in revenue on all maintenance and service contracts can be expected,
affecting income for suppliers, including Comverse.

US market sources inform ''Globes'' that the price of voice mailboxes in the US is
currently $5-$6 per mailbox. Prices in South America are $2-$3 per mailbox. When Comverse
supplied Verizon in late 2001, for example, the price was $6 per mailbox, for a grand
total of $175 million.

Moreover, Comverse recently lost a European voice mailbox contract to Tecnomen, which
asked only $5 per mailbox. Recently, US communications company VoiceStream purchased voice
mailboxes from Glenayre at $4 per mailbox. VoiceStream has approximately three million
subscribers. In other words, sooner or later, Comverse has to start lowering prices.

There is good news as well. Lucent Technologies (NYSE:LU) recently announced that in late
2005, it would cease supporting certain versions of its voice-mail systems. This means
that within two years, all the communications providers who bought those Lucent systems
must replace them. Replacement means a good deal of revenue for Comverse, as Lucent had a
20% - 25% share of the global voice mailbox market, and 40% of the US market.

However, Comverse should expect fierce competition from Openwave Systems (Nasdaq:OPWV),
its biggest competitor. Openwave recently decided to put aside its unified messaging
system, considered a world leader, in favor of focusing on data network-based voice
mailboxes.

Communications sector insiders believe that Openwave, which in recent weeks was forced to
lay-off a large number of workers, will invest significant resources in the voice mailbox
market. They note that Openwave's outstanding advantage over Comverse is its open system.

Moreover, Comverse recently shut down its games product. The original intent was to offer
a wide range of Internet and cellular services to communications providers. The company
tried developing location-based systems and services for e-commerce, games, etc. But
slowly it became apparent that most of these fields yield no revenue in the short term,
and it will take some time before significant revenue comes in.

Comverse was unsuccessful in identifying the products that will yield revenue in the short
and medium term, and which were long-term investments. Over the past two years, the
company has shut down most of these operations. Meanwhile, it's become clear that MMS is
the thing that's expected to bring in a good amount of income shortly.

The problem is that, to date, Comverse didn't pay enough attention to this particular
field, as opposed to Ericsson, Siemens and Nokia, for instance. At present, the battle for
European cellular domination is on. Almost all Tier-1 cellular service providers have
selected MMS suppliers and the launch is well on the way. It's doubtful that another
opportunity like this will come along.

Comverse's hope for MMS, right now, rests with the Far East communications market, where
supplier selection is at its peak. Comverse is banking on this and investing a great deal
of effort in the market. Sources inform ''Globes'' that communications service provider
representatives from Thailand, Taiwan and other countries have recently been seen
strolling around the Comverse campus in Ramat Hahayal.

Moreover, "Globes" recently reported that sources at Comverse claimed that the company
needed to acquire a few start-ups to bring in some new products, and assist in increasing
sales. But sources close to the company say that even if Comverse has acquisitive
intentions, it will be hard pressed to carry them out, as its decision making process is
faulty, and there is a lack of trust between the people who are supposed to be
recommending decisions.

"People are afraid to take responsibility for things that might get them fired," says one
person close to the company. "They're afraid their positions may be eliminated in favor of
others whom upper management protects. The result is that no one is willing to take on the
responsibility for a move that might fail".

Comverse responded: "In July of this year, Comverse announced a process of cut-backs and
reorganization. The company does not comment on specific divisions or individuals". As for
Nextel, Comverse said: "The company does not respond to rumors".

Lucent Technologies issued the following statement in response to the article:

"You state that Lucent said "it would cease supporting its voicemailboxes [in late 2005]."
This is simply untrue. While certain versions of our messaging systems like Sierra are
being phased out, Lucent's Messaging business remains committed to its customers and will
support them going forward.

"We continue to support customers with the features they need on our Caller Application
systems, a widely deployed voicemail platform. We have also been delivering our latest
AnyPath Messaging System to communications service providers in North America, South
America and Europe since 2001. In fact, we believe AnyPath's features and rapid adoption
positions us strongly in our major unified messaging markets today and well into the
future."

http://new.globes.co.il/serveen/

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