In the telecom business, success really depends on whether the big guys -- such as Verizon (NYSE:VZ) -- spend hard dollars on investment. It's a trickle-down theory, which once again is playing out.
One of the beneficiaries is Comverse Technology (NASDAQ:CMVT), which reported its quarterly earnings yesterday. The company is a leading provider of software and systems for enhanced telecommunications services. Such services include unified messaging, wireless instant messaging, voice-controlled dialing, and other whiz-bang features. These enhanced services are considered the "next big thing" in telecom; that is, a way to get incremental revenues from subscribers.
Sales at Comverse surged 22.6% to $221.39 million in the prior quarter. Net income was $7 million or $0.03 per diluted share, compared to a $0.03-per-diluted-share loss a year ago.
In fact, Comverse is experiencing sequential growth in its main three business segments: network systems, security and surveillance applications, and service-enabling software (such as for prepaid billing). So, it should be no surprise that the company upped guidance for 2004: $0.22 a share in earnings and revenues of $917 million, which compares to the previous estimate of $0.16 per-share earnings on $870 million in revenues.
Comverse also announced a high-profile deal for the quarter. Verizon Wireless agreed to use Yahoo!'s (NASDAQ:YHOO) instant messaging service, which is powered by Comverse technology.
The rebound in telecom seems to be real, as seen with strength in other providers -- like Lucent (NYSE:LU) and Cisco (NASDAQ:CSCO) -- in terms of overall financial results and mergers and acquisitions.
With $2.1 billion in the bank and a stronger market cap, Comverse is also likely to enter the fray in buying companies.
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Fool contributor Tom Taulli is the author of The EDGAR Online Guide to Decoding Financial Statements. He does not own shares of any stocks mentioned.
