Comverse Technology

Comverse Technology, Inc.

Company type	Public
Industry	Telecommunications software
Predecessor	Efrat Future Technologies Ltd.
Founded	1982 (1982)
Founder	Jacob "Kobi" Alexander, Boaz Misholi, Yechiam Yemini
Defunct	2013
Fate	Divested assets and ceased operations; successor companies include Comverse, Inc. and Verint Systems
Headquarters	Woodbury, New York , United States
Area served	Worldwide
Key people	Jacob "Kobi" Alexander (co-founder and CEO)
Products	Voice messaging software, short message service center (SMSC), value-added services for mobile network operators
Number of employees	Not specified

Comverse Technology, Inc. was a telecommunications software enterprise headquartered in Woodbury, New York, dedicated to serving mobile network operators. Established in 1982 and publicly traded on Nasdaq from 1986, the company developed value-added services and operated multiple subsidiaries. The name "Comverse" is a blend of "communication" and "versatility."

Under the leadership of co-founder and CEO Jacob "Kobi" Alexander, Comverse initially concentrated on centralized hardware and software solutions for voice and fax messaging, targeting telecom providers and large-scale businesses. Supported in part by Israeli government research and development grants, the firm rose to prominence in the mid-1990s with offerings that enabled law enforcement agencies to legally monitor communications. By the late 1990s, voice messaging software had become the company’s primary product, fueling rapid expansion alongside the surge in mobile phone adoption and surpassing $1 billion in revenue. Comverse established a dominant position in global voicemail management and marketed a widely adopted short message service center (SMSC) solution. Although its headquarters were in the United States, most research and development took place in Israel, positioning Comverse as a key player in Israel's high-tech industry and one of its largest software employers. It was also the first Israeli-affiliated company to be listed on the S&P 500 index.

In 2006, Comverse became embroiled in an options backdating controversy involving Alexander and other executives who faced charges including conspiracy, fraud, money laundering, and falsification of filings. Alexander fled to Namibia to evade extradition. The scandal resulted in Comverse’s removal from Nasdaq and the S&P 500, significant financial restatements, workforce reductions, and asset divestitures amid the 2008 economic downturn and evolving mobile market dynamics. By 2011, the company showed signs of recovery.

From 2012 through 2013, Comverse Technology divested all its assets and ceased operations. Its principal product lines continued under two separate entities: Comverse, Inc. and Verint Systems. Subsequent corporate transactions transformed Comverse, Inc. into Xura in 2015 and later Mavenir in 2017, while part of its business was acquired by Amdocs in 2015.

Subsidiaries

Comverse Technology managed several subsidiaries, many of which remain operational today. Their primary functions included:

• Comverse (also known as Comverse Network Systems or Comverse CNS) focused on software and systems delivering value-added services across voice, messaging, mobile Internet, and mobile advertising, including integrated billing and customer management solutions. Its offerings allowed versatile deployment options—network-based, hosted, or managed—and supported circuit-switched, IP, IMS, and converged network environments. Serving more than 500 communication service providers across over 130 countries, Comverse supported upwards of two billion subscribers and accounted for approximately 70% of Comverse Technology’s revenue. It operated around 100 offices worldwide with its main office located in Wakefield, Massachusetts.

• Verint Systems, previously known as Comverse Infosys (1999–2002), specialized in analytics for intercepted communications as well as digital video security, surveillance systems, and enterprise business intelligence solutions. Its products assisted governments and corporations in processing large volumes of data for operational efficiency and security purposes. Verint served over 10,000 clients globally across 150 countries, employed about 2,500 people worldwide, and was headquartered in Melville, New York. By 2011, Comverse Technology owned a controlling interest of 52%.

• Ulticom delivered signaling solutions for wireless, wireline, and Internet communications utilized by telecom equipment manufacturers and service providers internationally to enable functions such as mobility management, location services, billing/payment processing, switching, and messaging. Based in Mount Laurel, New Jersey, with additional offices throughout the US, Europe, and Asia, Ulticom was acquired by Comverse in 1996 before being sold off in 2010.

• Startel, acquired by Comverse Technology in 1992, offered integrated voice, data, and networking products tailored for global call center operations. The company was sold to financier Bill Robertshaw during the late 2000s before transitioning to employee ownership by 2011.

• Starhome specialized in international roaming services along with core network solutions for mobile operators utilizing intelligent networks and next-generation network technologies. It remained fully owned by Comverse Technology until its sale to Fortissimo Capital for $54 million in 2012.

• ComSor operated as a venture capital arm created jointly with Soros Fund Management, investing directly into startup companies during the late 1990s through early 2000s.

Origins

The company's roots date back to 1982 or 1983, when three Israelis—investment banker Jacob "Kobi" Alexander, engineer Boaz Misholi, and computer science professor Yechiam Yemini—launched the Israeli startup Efrat Future Technologies Ltd.. Misholi suggested creating centralized hardware solutions for voice and fax messaging aimed at telecom operators and large enterprises for resale purposes. The founders quickly returned to Israel to pursue government funding for research and development.

In 1984, they formed Comverse in the United States as the parent entity of Efrat. The name "Comverse" is a blend of "communication" and "versatility." By 1986, Comverse went public on the Nasdaq Stock Market with a valuation of $20 million, marking its final round of financing. However, internal disputes emerged: Yemini divorced Alexander’s sister, and by 1987 Alexander assumed full control after the other partners exited. At that stage, the company was a penny stock on the brink of failure.

Early successes

Under Alexander’s guidance, Comverse experienced a notable turnaround. In 1989, the Ascom Group invested $6 million directly into the firm. By 1990, Comverse secured a significant $10 million contract to provide voicemail and fax systems for West Germany’s cellular networks, outperforming larger rivals. Deutsche Telekom became one of its earliest major clients. By 1991, annual revenue had grown to $17 million, driven by combined voice and fax mailbox offerings. The company strategically focused on small- and medium-sized wireless carriers in Europe rather than targeting large U.S. telecom firms, while also venturing into emerging markets such as Mexico and China with its Trilogue virtual telephone service. Over time, Comverse transitioned from hardware-centric products to software solutions.

Although headquartered in the U.S., most manufacturing took place in Israel, leveraging government incentives including R&D tax credits and grants from the Office of the Chief Scientist and the Israel-U.S. Binational Industrial Research and Development Foundation. This approach was similar to other Israeli technology companies like Mercury Interactive. Throughout the 1990s, Comverse secured at least 69 R&D grants from Israeli sources.

In 1993, Comverse announced a 341% increase in profits on revenues near $64 million and was recognized as a "Company to Watch" by Fortune. Nonetheless, its stock price fell in 1994 following underwhelming earnings reports.

By 1995, Comverse had gained recognition primarily for its AudioDisk product, which was sold internationally to law enforcement and intelligence agencies for recording wiretap data. AudioDisk represented about half of the company’s revenue at that time and received favorable evaluations from market analysts.

Growth with wireless

During the late 1990s mobile phone boom, Comverse established itself as a leading provider of voice messaging software. Its focus on wireless operators and international clientele secured a strong foothold in the global mobile voicemail management market. The proliferation of SMS text messaging further enhanced its business; initially developed as voicemail notification tools, these capabilities evolved into a comprehensive short message service center (SMSC) solution branded Intelligent Short Message Service Center (ISMSC). Operating on Unix-based platforms such as UnixWare and Linux, ISMSC offered an economical choice for lower-volume networks, competing with Logica's Telepath. Notably, all six wireless carriers in Hong Kong were among its key users.

Comverse played an active role in shaping international wireless standards, including co-founding the 2001 Speech Application Language Tags (SALT) forum to improve voice integration within web applications. It also participated in organizations like the Open Mobile Alliance and TM Forum to influence industry protocols.

The company expanded through acquisitions both in Israel and the U.S., purchasing Dale, Gesek, McWilliams & Sheridan (later renamed Ulticom) in 1996 and acquiring competitor Boston Technology for $843 million in stock in 1997. This move granted access to the substantial U.S. telecom market and positioned Comverse as a supplier of voice messaging services to 12 of the top 20 global carriers, ranking it third after Lucent and Northern Telecom. In 1999, it established subsidiaries Comverse Network Systems and Comverse Infosys to oversee telecom services platforms and digital monitoring products respectively. By 2000, revenues had climbed to $1.2 billion with worldwide operations supported by rapid acquisitions including Loronix, Gaya Software, and Exalink within a single month. Its stock price surged from roughly $10 in 1998 to over $120 by early 2001, raising capital multiple times on Nasdaq for entities such as Ulticom shortly before the dot-com bubble burst.

Widely regarded as a flagship of Israel’s high-tech sector, Comverse received praise from media outlets like Haaretz and The Jerusalem Post. CEO Jacob "Kobi" Alexander held significant international influence with ambitions to position Comverse as Israel’s equivalent of Nokia was for Finland. The company was a major employer of software engineers within Israel and enjoyed broad ownership among Israeli investors. It maintained a distinctive Israeli management culture under CEO Ze'ev Bregman characterized by informal communication channels and a relaxed organizational structure. In 1999, Comverse Technology became the first Israeli-linked company listed on the S&P 500 index and soon after joined the NASDAQ-100.

The recession in the early 2000s affected Comverse with profit warnings and a sharp stock decline during mid-2001. The company responded by eliminating over 3,000 jobs globally through several restructuring phases but continued acquiring firms such as instant messaging provider Odigo for $20 million in 2002. Despite difficulties, it remained one of Israel’s leading blue-chip technology stocks but faced criticism for overly optimistic projections amid broader industry downturns. By this time European mobile voicemail markets had become saturated while prepaid wireless declined. Comverse Infosys rebranded as Verint to distinguish its more successful business segment and conducted a modest initial public offering of minority shares.

By then, Comverse Technology employed more than 5,000 people across nearly 40 countries with revenues reduced to $735 million due to spin-offs and economic headwinds.

In late 2001, Fox News reported allegations that wiretapping equipment supplied by Comverse Infosys to U.S. government agencies might contain vulnerabilities permitting unauthorized interception; however no legal or commercial consequences ensued from these claims. These allegations remain unsubstantiated and are generally dismissed as conspiracy theories.

By 2005, Comverse reported sales of $959 million with approximately half its workforce based in Israel. The majority of R&D staff were located across seven facilities in Tel Aviv’s Ramat HaHayal district while business operations and marketing were headquartered in Woodbury, New York.

Options Backdating Controversy

In 2006, Comverse Technology became the center of an options backdating controversy. In May of that year, founder and CEO Jacob Alexander stepped down. By July 2006, Alexander, CFO David Kreinberg, and former senior general counsel William Sorin faced charges in the United States District Court for the Eastern District of New York for conspiracy, fraud, money laundering, and submitting false documents to the Securities and Exchange Commission (SEC), related to stock option transactions spanning from 1998 to 2006. Allegations included manipulating option dates to coincide with lower stock prices, fabricating option holder identities, and establishing covert funds for unauthorized profits. The SEC also brought civil charges concerning inaccurate financial disclosures and proxy statements dating back to 1991 through 2005.

Following these developments, Alexander fled the United States and was declared a fugitive by the FBI in August 2006. He was apprehended in Namibia in September, where he had acquired property. If extradited and convicted, he faced a potential prison sentence of up to 25 years. Released on bail, Alexander contested extradition on the grounds that the alleged offenses were not criminal acts under Namibian law. Approximately $64 million had been transferred by him to Israel, primarily routed through Namibia; meanwhile, U.S. authorities blocked another $50 million as part of efforts to seize assets totaling $138 million. In April 2010, Namibia’s Supreme Court permitted him to remain in the country while extradition proceedings continued. By November 2010, Alexander reached a settlement with U.S. authorities for $53.6 million to resolve SEC claims; these funds were designated to address shareholder litigation against Comverse.

William Sorin entered a guilty plea and received a one-year prison sentence in 2007. David Kreinberg cooperated with prosecutors, reimbursed $2.4 million to the SEC, and was sentenced to time served in 2011. Out of more than one hundred companies investigated for options backdating practices, Comverse became a prominent example and was dubbed a "poster child for stock option fraud" by industry analysts.

Ongoing Challenges

Recovering from the scandal proved difficult for Comverse Technology. The three executives charged—who had remained as consultants—were terminated without severance packages as the company initiated legal proceedings against them. The board expanded its membership from five to ten directors, all American nationals replacing former Israeli members. In April 2007, new CEO Andre Dahan took the helm; however, persistent management difficulties impeded both innovation efforts and expansion plans. Despite favorable market conditions in 2006–2007, workforce reductions occurred mid-2007 amid speculation by analysts about a potential corporate breakup.

Due to complications stemming from options backdating issues, Comverse failed to submit timely financial filings with the SEC. Consequently, its shares were delisted from the Nasdaq Stock Market on February 1, 2007, and removed from both the S&P 500 and NASDAQ-100, subsequently trading over-the-counter on the Pink Sheets. In 2009, the SEC reached a settlement with Comverse that imposed no monetary penalties but included a permanent injunction against future violations; similar agreements were made with Ulticom. The failure to file timely reports exposed the company to risks of losing its stock registration—a process still unresolved as of 2011.

The 2008 financial crisis further exacerbated challenges at Comverse, leading to layoffs in October 2008, March 2009, and August 2009. The company reportedly suffered significant financial losses in 2009 consistent with broader trends impacting technology firms. Nonetheless, certain products retained strong market positions—Yankee Group ranked their billing solutions as number one globally—and Comverse maintained leadership in multimedia message service centers for wireless carriers worldwide. However, increasing smartphone penetration and email usage eroded demand within carrier markets for some offerings. By 2009, senior management was largely American; CEO Dahan encountered internal criticism attributed partly to cultural tensions.

At the start of 2010, Comverse announced plans to publish comprehensive financial reports and pursue relisting on Nasdaq while anticipating additional workforce reductions. A notable positive development was an $80 million capital infusion from investor George Soros in July 2010. Despite this support, financial statements remained unpublished; by August 2010, the company disclosed cash flow difficulties alongside further layoffs. Market capitalization fell below $1 billion amid ongoing delisting concerns. CEO Dahan described this period as "challenging times." Industry observers suggested dismantling parts of the company through asset sales and spin-offs.

Facing liquidity constraints, Comverse enlisted Goldman Sachs to explore divestiture opportunities; multiple large technology companies and private equity firms expressed interest in acquiring Comverse or its subsidiary Verint respectively. The company employed approximately 4,000 individuals—half based in Israel and most others located in the United States and France. Reporting issues since 2006 had cost around $500 million and severely impacted liquidity. Executive bonuses awarded during workforce reductions provoked employee dissatisfaction. Restructuring measures affected the NetCentrex division in France with possible layoffs or closure considered.

In October 2010, Comverse agreed to sell its two-thirds ownership stake in Ulticom to an American private equity firm for $90 million; this transaction closed in December. Additionally, it divested part of its holdings in Verint for $80 million along with land assets in Ra'anana valued at $27 million.

That same month saw Comverse release restated financial statements covering fiscal years 2005 through 2008 that revealed losses totaling approximately $1 billion. In February 2011, reporting for fiscal year 2009 was delayed amid restructuring efforts dividing operations into four separate entities focused anew on mobile carrier billing systems; further layoffs were anticipated.

Fiscal year 2009 revenues reported in March 2011 amounted to $1.58 billion—a decline from $1.72 billion two years prior—with an overall net loss of $273 million recorded. CEO Dahan resigned following this period; during his leadership tenure stock value declined by 68%, between 2,000 and 2,500 employees were laid off while he earned over $20 million plus a $5 million severance payment. Israeli business media offered predominantly critical evaluations of his performance.

Charles Burdick—formerly non-executive chairman—assumed the CEO role becoming the first American chief executive at Comverse.

In April 2011, Comverse settled with U.S. authorities for $2.8 million over violations of the Foreign Corrupt Practices Act related to improper payments made between 2003 and 2005 to Hellenic Telecommunications Organization disguised as sales commissions within accounting records.

Expectations for Recovery

At the start of 2011, experts from Oppenheimer & Co., J.P. Morgan, and Barclays regarded Comverse Technology as strategically positioned either to continue its operations or to be acquired. This optimism was based on resolved financial reporting issues, organizational restructuring, enhanced cash flow, and revenue improvements. Zacks Investment Research anticipated the company would achieve profitability again in fiscal 2011. During this period, Comverse secured new contracts worth tens of millions, slightly expanded its workforce, and maintained a staff of approximately 4,000, including outsourced personnel.

By June 2011, Comverse disclosed its fiscal 2010 financial results and completed its annual audited reports. The company’s revenue increased to $1.63 billion while the net loss decreased by half to $132.3 million; cash holdings were deemed adequate for near-term requirements. A further sign of recovery was Comverse’s relisting on NASDAQ in September 2011. The fiscal 2011 report released in April 2012 reflected stable revenues at $1.59 billion and a lowered net loss of $58.7 million.

Corporate Restructuring

In August 2012, plans were revealed to dismantle Comverse Technology as an operating entity and reestablish Comverse Network Systems as an independent firm under the name Comverse. This restructuring allowed Verint Systems to repurchase the majority stake previously held by Comverse Technology and divest other subsidiary businesses. According to Burdick, this strategy would provide shareholders with a tax-efficient distribution and direct ownership in two financially robust public companies. Philippe Tartavull was named CEO of the newly independent Comverse. Fiscal year 2012 marked a return to profitability with net income reaching $5.1 million.

The reorganization concluded on 4 February 2013, effectively dissolving Comverse Technology as a holding company.

Later, in June 2015, Comverse divested its BSS division to Amdocs. Following a merger in September 2015, the company adopted the name Xura, and after additional acquisitions and consolidations, it became part of Mavenir in February 2017.

Industry Accolades

Comverse Technology earned numerous awards within the industry, including:

• 2002 – Product of the Year from Technology Marketing Corporation for Verint’s Ultra IntelliMiner
• 2004 – Product of the Year by CMP Media for Verint’s Ultra Intelligent Recording
• 2004 – Innovative Solutions Award from CDMA Development Group for Comverse’s Multimedia Messaging Service Center
• 2005-2009 – Telecom BSS Vendor of the Year in Asia Pacific awarded by Frost and Sullivan
• 2007 – Best VoIP Product or Service Award from International Engineering Consortium for Converged IPCentrex
• 2007 – IMS Leadership Award from Technology Marketing Corporation for Converged Messaging Solution
• 2007 – InfoVision Award from International Engineering Consortium for Converged Billing Suite
• 2007 – Internet Telephony Excellence Award from Technology Marketing Corporation for MyCall Converged Communications
• 2009-2010 – Internet Telephony BSS/OSS Excellence Award from Technology Marketing Corporation for ONE Billing & Active Customer Management
• 2010 – Excellence Award from Virgo Publishing for Best Cost Management Implementation related to its Business Support System product

Bibliography

• Innovation and the State: Political Choice and Strategies for Growth in Israel, Taiwan, and Ireland, Dan Breznitz, Yale University Press, Revised edition, New Haven, 2007, ISBN 978-0-300-12018-9
• The Software Industry in Emerging Markets, Simon Commander, Edward Elgar Publishing, Cheltenham, 2005, ISBN 1-84542-247-3
• Wireless Messaging Demystified, Donald Longueuil, McGraw-Hill Professional, New York, 2003, ISBN 0-07-138629-7
• History of Greed: Financial Fraud from Tulip Mania to Bernie Madoff, David E. Y. Sarna and Andrew Malik, John Wiley and Sons, 2010, ISBN 978-0-470-60180-8

External links

• Archived official website of Comverse Technology