PROSPECTUS
339,601 SHARES
COMVERSE TECHNOLOGY, INC.
COMMON STOCK
The shareholders identified in this Prospectus are offering to sell up to
339,601 shares of Common Stock of Comverse Technology, Inc. Comverse will not
receive any of the proceeds from such sales.
The selling shareholders propose to sell the shares from time to time in
private or public transactions occurring either on or off the Nasdaq National
Market at prevailing market prices or at negotiated prices. Sales may be made
directly to purchasers or through brokers or to dealers, who are expected to
receive customary commissions or discounts.
The selling shareholders and participating brokers and dealers may be
deemed to be "underwriters" within the meaning of the Securities Act of 1933, as
amended, in which event any profit on the sale of shares by those selling
shareholders and any commissions or discounts received by those brokers or
dealers may be deemed to be underwriting compensation under the Securities Act.
Comverse's Common Stock is traded on the Nasdaq National Market under the
symbol "CMVT." On August 30, 1999, the closing price of the Common Stock was
$76.625 per share.
YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 BEFORE
MAKING A DECISION TO PURCHASE OUR STOCK.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if this
Prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
PROSPECTUS DATED September 16, 1999
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YOU SHOULD ONLY RELY ON THE INFORMATION INCORPORATED BY REFERENCE OR
PROVIDED IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE
ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE COMMON STOCK IS NOT BEING
OFFERED IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME
THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY
DATE OTHER THAN THE DATE ON THE FRONT OF SUCH DOCUMENT.
TABLE OF CONTENTS
PAGE
About This Prospectus..........................................................1
Where You Can Find More Information............................................1
Summary- The Company...........................................................3
Risk Factors...................................................................4
Recent Developments...........................................................10
Use Of Proceeds...............................................................10
Selling Shareholders..........................................................11
Description Of Capital Stock..................................................12
Plan Of Distribution..........................................................13
Legal Matters.................................................................14
Experts.......................................................................15
ABOUT THIS PROSPECTUS
This Prospectus is a part of a registration statement (the "Registration
Statement") that we have filed with the Securities and Exchange Commission (the
"SEC") utilizing a "shelf registration" process. You should read both this
Prospectus and any supplement together with additional information described
under "Where You Can Find More Information."
All references in this Prospectus to "Comverse," the "Company," "we," "us,"
or "our" mean Comverse Technology, Inc., including the entities acquired by the
Company and its other directly and indirectly owned subsidiaries.
WHERE YOU CAN FIND MORE INFORMATION
Comverse files annual, quarterly and special reports, proxy statements and
other information required by the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), with the SEC. You may read and copy any document we file
at the SEC's public reference rooms located at 450 5th Street, N.W., Washington,
D.C. 20549, at Seven World Trade Center 13th Floor, New York, New York 10048 and
at Northwest Atrium Center, 5000 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference rooms. Our SEC filings are also available to
the public from the SEC's web site at: http://www.sec.gov.
Comverse has filed with the SEC a registration statement on Form S-3 under
the Securities Act of 1933, as amended (the "Securities Act"), with respect to
the Common Stock. This Prospectus, which constitutes a part of the Registration
Statement, does not include all the information contained in the Registration
Statement and its exhibits. For further information with respect to Comverse and
the Common Stock, you should consult the Registration Statement and its
exhibits. Statements contained in this Prospectus concerning the provisions of
any
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documents are necessarily summaries of those documents, and each statement
is qualified in its entirety by reference to the copy of the document filed with
the SEC. The Registration Statement and any of its amendments, including
exhibits filed as a part of the Registration Statement or an amendment to the
Registration Statement, are available for inspection and copying through the
entities listed above.
The SEC allows us to "incorporate by reference" the documents that we file
with the SEC. This means that we can disclose important information to you by
referring you to those documents. Any information we incorporate in this manner
is considered part of this Prospectus. Any information we file with the SEC
after the date of this Prospectus and until this offering is completed will
automatically update and supersede the information contained in this Prospectus.
We incorporate by reference the following documents that we have filed with
the SEC and any filings that we will make with the SEC in the future under
Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act until this offering is
terminated:
o........Annual Report on Form 10-K for the year ended January 31, 1999;
o........Quarterly Report on Form 10-Q for the quarters ended April 30, 1999 and
July 31, 1999; and
o........Description of Comverse's Common Stock contained in
its registration statement on Form 8-A filed with the SEC on March 17,
1987, as amended.
We will provide without charge to each person to whom a copy of this
Prospectus is delivered, upon written or oral request, a copy of any or all of
the documents which are incorporated by reference into this Prospectus except
the exhibits to such documents (unless such exhibits are specifically
incorporated by reference in such documents). Requests for copies should be
directed to: Comverse Technology, Inc., Attention: Vice President, Corporate and
Marketing Communications, 170 Crossways Park Drive, Woodbury, NY 11797,
telephone number (516) 677-7200.
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SUMMARY--THE COMPANY
Because this is a summary, it does not contain all the information about
Comverse that may be important to you. You should read the more detailed
information and the financial statements and related notes which are
incorporated by reference in this Prospectus.
Comverse manufactures and markets special-purpose computer and
telecommunications systems and software for multimedia communications and
information processing applications. Our products are used in a broad range of
applications by wireline and wireless telephone network operators, government
agencies, call centers, financial institutions and other public and commercial
organizations worldwide.
Our products include multimedia messaging and information processing
systems and software that support enhanced services offerings by telephone
companies and other providers of telecommunications services. Our products
enable these organizations to provide their customers with a variety of
integrated, revenue-generating services, such as personalized call answering,
voice mail, fax mail, unified multimedia messaging, Internet messaging, pre-paid
calling, short text messaging, interactive voice response and audiotext services
that are typically offered by service provider organizations to their customers,
often on a subscription or pay-per-call basis.
We also manufacture multiple channel, multimedia digital monitoring systems
for recording, surveillance and information gathering and analysis activities of
law enforcement and intelligence agencies, and digital recording systems used by
financial services companies, emergency services providers and call center
operations, among others, for transaction verification and training purposes.
Comverse offers a variety of telecommunications software products,
including products that are integrated with our systems and products that work
in combination with other systems to support "intelligent network" and "advanced
intelligent network" applications, such as 800 number translation, Internet
routing, short text messaging, local number portability, cellular roaming and
emergency "911" services, as well as "interactive voice response" based enhanced
services, such as virtual private network, network announcement, customer
service/customer care, operator-free collect calling, call forwarding and
directory services.
Comverse was incorporated in New York in October 1984. Our principal
executive offices are located at 170 Crossways Park Drive, Woodbury, New York
11797, and our telephone number is (516) 677-7200.
For additional information relating to our business, operations,
properties, certain acquisitions and other matters, see the documents referred
to above under "Where You Can Find More Information."
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RISK FACTORS
Before purchasing any shares, you should carefully consider the following
risk factors in addition to the other information contained and incorporated by
reference in this Prospectus. Certain statements in this Prospectus and in
documents incorporated by reference in this Prospectus are forward-looking and
are identified by the use of forward-looking words or phrases such as "plan,"
"planned," "intend," "intended," "will be positioned," "expect," is or are
"expected," "anticipate" and "anticipated." These forward-looking statements
reflect only our current expectations. To the extent any of the information
contained or incorporated by reference in this Prospectus constitutes a
"forward-looking statement" as defined in Section 27A(i)(1) of the Securities
Act, the following risk factors are cautionary statements identifying important
factors that could cause actual results to differ materially from those in the
forward-looking statement.
MANAGEMENT OF GROWTH AND ACQUISITIONS
Comverse has grown rapidly over the past decade and continues to experience
rapid growth in its operations, both through internal expansion and acquisitions
of other companies. Our future success will depend in part on our ability to
manage growth effectively. As the Company's operations expand worldwide,
management issues are likely to become more complex and challenging. We also
regularly examine opportunities to acquire other companies or lines of business.
Acquisitions present a number of significant financial, operational and legal
risks. It can also be difficult to combine the operations of an acquired
business with our own, without suffering the loss of key personnel, customers or
distributors. During 1998, we merged with Boston Technology, Inc. ("Boston
Technology"). As a result of its significantly greater concentration on a small
number of telephone company customers, Boston Technology's business has
historically been considerably more volatile than ours, and the operations of
Comverse following the merger may be less predictable and subject to greater
risks from actions of individual customers than our operations prior to the
merger. If Comverse fails to manage its growth effectively, future operations
and financial results will be adversely affected.
EMPHASIS ON LARGE SYSTEMS
Our business has, to a significant extent, been based on contracts for
large, high capacity systems, and we continue to emphasize these systems in our
product development and marketing plans. Users of high-capacity systems, such as
telephone companies, require systems that provide an exceptionally high level of
reliability. Such systems are typically more costly to design, build and
support. Contracts for large installations typically involve a lengthy and
complex bidding and selection process, and our ability to obtain particular
contracts is difficult to predict. In addition, the timing and scope of these
opportunities and the pricing and margins associated with any eventual contract
award are difficult to forecast, and may vary substantially from transaction to
transaction. Comverse's traditional dependence on large orders, and the
investment required to enable us to perform such orders, without assurance of
continuing order flow from the same customers and predictability of gross
margins on any future orders, increase the risk associated with our business.
TECHNOLOGICAL CHANGE AND COMPETITION
The telecommunications industry is undergoing rapid technological changes,
and our continued success will depend on our ability to enhance our existing
products and to introduce new products on a timely and cost-effective basis.
Comverse's products utilize complex hardware and software technology that
performs critical functions to highly demanding standards. The greater the
complexity of our products, the greater is the risk of future performance
problems or delays in product introductions, which could damage our business and
financial results.
We sell a majority of our products to telephone companies and other
telecommunication services providers. The telecommunications services industry
is undergoing significant change as a result of deregulation and privatization
worldwide. Our business can be seriously affected by unforeseen changes in the
competitive or regulatory environment in our various markets. Our business is
extremely competitive, and we expect competition
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to continue to intensify. Our existing competitors will continue to present
substantial competition, and other companies, many with considerably greater
financial, marketing and sales and other resources, may enter our markets in the
future.
The telecommunications industry has experienced a continuing evolution of
product offerings and alternatives for delivery of services. These trends have
affected and may be expected to have a significant continuing influence on
conditions in our markets. Rapid and significant change makes planning decisions
more difficult and increases the risk inherent in the planning process.
RISKS OF GOVERNMENT BUSINESS
Many of our sales are made to customers that are owned or controlled by
governments or government instrumentalities. Government business is, in general,
subject to special risks, such as delays in funding; termination of contracts or
subcontracts for the convenience of the government; termination, reduction or
modification of contracts or subcontracts in the event of changes in the
government's policies or as a result of budgetary constraints; obligations of
performance guarantees and restrictions on the draw-down of funds subject to
achievement of performance milestones; requirements to obtain and maintain
security clearances for operating subsidiaries and key personnel; and increased
or unexpected costs resulting in losses or reduced profits under fixed price
contracts. The special risks associated with government contracts could have a
material adverse effect on our future business and financial performance.
The market for telecommunications monitoring systems, which are primarily
sold to government customers, is in a period of significant transition.
Budgetary constraints, uncertainties resulting from the introduction of new
technologies in the telecommunications industry and shifts in the pattern of
government expenditures resulting from geopolitical events have increased
uncertainties in this industry, resulting in certain instances in the
attenuation of government procurement programs beyond their originally expected
performance periods and an increased incidence of delay, cancellation or
reduction of planned projects. The delay and uncertainties surrounding the
Communications Assistance for Law Enforcement Act have had a significant
negative impact on purchasing plans of law enforcement agencies in North America
engaged in monitoring activities. Our ability to obtain government orders in
particular instances may also be affected by decisions of potential government
customers to develop their own products or technical solutions internally,
rather than through the use of outside suppliers, and by decisions of government
contractors and systems integrators to bid on individual government procurement
opportunities. The lack of predictability in the timing and scope of government
procurements has made planning decisions more difficult and has increased the
associated risks.
INTERNATIONAL OPERATIONS
A significant portion of our sales are made to customers outside of the
United States. International transactions involve particular risks, including
political decisions affecting tariffs and trade conditions, rapid and unforeseen
changes in economic conditions in individual countries, turbulence in foreign
currency and credit markets, and increased costs resulting from lack of
proximity to the customer. Our products must be designed to meet the regulatory
standards of foreign markets, and any inability to obtain foreign regulatory
approvals can cause us to lose sales opportunities. In addition, international
sales frequently require special features and customization to satisfy local
market conditions, and certain international customers may require longer
payment terms than we typically provide.
Volatility in international currency exchange rates may have an impact on
our operating results. Comverse has significant contracts payable in foreign
(primarily Western European and Japanese) currencies. As a result of the
unpredictable timing of purchase orders and payments under such contracts and
other factors, it is often not practicable for us to effectively hedge the risk
of significant changes in currency rates during the contract period. Since
Comverse engages in currency hedging only to a limited extent, our financial
results can be affected by the impact of currency fluctuations in any particular
period, as well as the cost of such hedging activities that we do perform.
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In the past few years, we have made significant sales to customers in
Japan, China, Taiwan and other countries in the Far East and Southeast Asia. The
economic downturn in this region has significantly reduced the demand for our
systems in certain countries. If regional economic conditions fail to improve,
our operating results could be more seriously affected in the future. Moreover,
our future operating results will be adversely affected should current economic
instability result in more widespread slowdown or recessionary conditions in
other major world markets, or in severe trade or currency disruptions.
SUBSTANTIAL LEVERAGE
Comverse has a significant amount of indebtedness outstanding. As of April
30, 1999, our total consolidated long-term liabilities were approximately $427.0
million. The amount of debt carried by Comverse can affect our business in a
variety of ways, such as (i) limiting our ability to obtain any necessary
additional financing in the future on reasonable terms, or at all; (ii)
requiring the dedication of a substantial portion of our cash flow from
operations to debt service payments, making it unavailable for other purposes;
(iii) limiting our flexibility in operating, or reacting to changes in, our
business; (iv) placing us at a competitive disadvantage to certain of our
competitors; and (v) making us more vulnerable to downturns in our business.
CASH MANAGEMENT AND INVESTMENT ACTIVITIES
Comverse holds a significant portion of its assets in a variety of
financial instruments, including government obligations, commercial paper,
medium-term notes, bank time deposits, money-market accounts, common and
preferred stocks and convertible debt obligations. Decisions as to our financial
holdings are made both for purposes of cash management and, to some extent, as
strategic and portfolio investments. These activities subject Comverse to risks
inherent in the capital markets generally, and to the performance of other
businesses over which we have no direct control. Through ComSor Investment Fund
N.V., a company we formed in partnership with Quantum Industrial Holdings Ltd.,
an investment company managed by Soros Fund Management LLC, we engage in
investment activities including venture capital investments in high technology
firms, primarily located in Israel. Comverse also engages in direct strategic
and capital management investment activities for its own account.
We believe that Comverse's investments will enable it to participate in
technology innovation opportunities in areas of interest to it without having to
dedicate the capital and management resources that would be necessary for such
participation through its own internal research and development efforts. Our
objectives are also to initiate relationships that may result in eventual
expansion of Comverse's product and marketing positions and potential
acquisition opportunities, and to leverage Comverse's technological expertise
and established relationships in the technology, business and financial
communities to identify and participate in special opportunities. Investments in
early-stage technology ventures, however, are subject to a number of risks
associated with the limited operating history of such ventures and the frequent
illiquidity of their securities. While we do not regard Comverse's portfolio and
strategic investment activities as a primary element of its overall business
plan, we expect to continue to allocate some of Comverse's liquid assets for
these purposes and, in particular, to increase our holdings in technology
companies as part of Comverse's long-term growth strategy. Since Comverse
maintains a significant amount of liquid assets relative to our overall size,
our financial results in the future may, to a greater degree than in the past,
be affected by the results of our capital management and investment activities
and the risks associated with those activities.
SUBSIDIARY OPERATIONS
Substantially all of Comverse's operations are conducted through
subsidiaries. We are limited by contract in the amount of dividends Comverse can
receive from one of its subsidiaries in Israel to 75% of their net income. In
addition, because Comverse's Israeli subsidiaries have received certain benefits
under the laws relating to "Approved Enterprises" (described in the following
paragraph), the payment of dividends to Comverse may subject those subsidiaries
to certain Israeli taxes to which they would otherwise not be subject. Our
Israeli subsidiaries are required under Israeli law to withhold for tax
purposes, at a rate of up to 25%, cash dividends paid to foreign residents.
Under the United States-Israel Tax Treaty, a 12.5% Israeli dividend withholding
tax would apply to
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dividends paid to a U.S. corporation (such as Comverse) that owns 10% or more of
an Israeli company's voting stock for, in general, the current and preceding tax
years of the Israeli company. Dividends on income derived from an "Approved
Enterprise" are subject to a 15% dividend withholding tax. Comverse has also
granted options to certain of its officers and employees to purchase equity in
certain of its subsidiaries; if such options are exercised, Comverse's
participation in any earnings and future distributions by such subsidiaries will
be reduced.
OPERATIONS IN ISRAEL; REDUCED GOVERNMENT SUBSIDIES
A significant portion of our research and development and manufacturing
operations are located in Israel and may be affected by regulatory, political,
military and economic conditions in that country. Comverse's historical
operating results reflect substantial benefits from programs sponsored by the
Israeli government for the support of research and development, as well as tax
moratoriums and favorable tax rates associated with investments in approved
projects ("Approved Enterprises") in Israel. The Israeli government has
indicated its intention to re-examine certain of its policies in these areas.
Recently, the Israeli government acted to increase, from between 2% and 3%
of associated product sales to 3% of associated product revenues (including
service and other related revenues), the annual rate of royalties to be applied
to repayment of benefits under a conditional grant program administered by the
Office of the Chief Scientist of the Ministry of Industry and Trade, a program
in which we have regularly participated and under which we continue to receive
significant benefits through reimbursement of up to 50% of qualified research
and development expenditures. The repayment of amounts received under the
program will be accelerated through these higher royalty rates until repayment
is completed. Repayment of any amount received under programs which have been,
or will be, approved by the Office of the Chief Scientist after January 1, 1999
will entail repayment of the amount received (calculated in U.S. dollars), plus
interest on such amount at a rate equal to the 12-month LIBOR rate in effect at
the time of the approval of the program. In addition, permission from the
government of Israel is required for us to manufacture outside of Israel
products resulting from research and development activities funded under these
programs, or to transfer outside of Israel related technology rights. In order
to obtain such permission, we may be required to increase the royalties to the
applicable funding agencies and/or repay certain amounts received as
reimbursement of research and development costs. The Israeli authorities have
also indicated that this funding program will be further reduced significantly
or eliminated in the future, particularly for larger companies such as Comverse.
The Israeli government has also shortened the period of the tax moratorium
applicable to Approved Enterprises from four years to two years. Although this
change has not affected the tax status of our projects that were eligible for
the moratorium prior to 1997, it applies to the subsequent "Approved Enterprise"
projects.
If further changes in the law or government policies regarding those
programs were to result in their termination or adverse modification, or if
Comverse were to become unable to participate in or take advantage of those
programs, the cost of our operations in Israel would increase and there could be
a material adverse effect on our operations and financial results. To the extent
that Comverse increases its activities outside Israel, which could result from,
among other things, future acquisitions, such increased activities will not be
eligible for programs sponsored by Israel.
Although Comverse's operations have not been adversely affected to date by
political or military conditions in Israel, a disruption of our operations in
Israel due to political, military or other conditions could have a material
adverse effect on our operations and financial results.
General inflation in Israel and increases in the cost of attracting and
retaining qualified scientific, engineering and technical personnel in Israel,
where the demand for such personnel is growing rapidly with the expansion of
high technology industries, have increased our cost of operations in Israel.
These increases have not been offset in all periods by proportional devaluations
of the Israeli shekel relative to the U.S. dollar and, as a result, have had a
negative impact on Comverse's results of operations. Continued increases in our
shekel-denominated costs without corresponding devaluation could have a material
adverse effect on our future operating results.
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DEPENDENCE ON KEY PERSONNEL; STOCK OPTIONS
Our future success will depend, to a considerable extent, on the
contributions of senior management and key employees, many of whom would be
difficult to replace, and on our Company's ability to attract and retain
qualified employees in all areas of our business. Competition for such personnel
is intense, particularly in the computer and telecommunications industries. In
order to attract and retain talented and qualified personnel, and to provide
incentives for their performance, Comverse has emphasized the award of stock
options as an important element of its compensation program, including, in the
case of certain personnel, options to purchase shares in certain of our
subsidiaries. If such options are exercised, Comverse's participation in any
future earnings or distributions by these subsidiaries will be reduced.
INCREASED EXPENDITURES ON OPERATIONS
We have significantly increased expenditures in all areas of our operations
during recent years, and we plan to continue to make significant investment in
the growth of our operations during future periods. The competitiveness of our
products and our ability to take advantage of future growth opportunities will
depend upon our ability to enhance the range of features and capabilities of our
existing product lines, develop new generations of products and expand our
marketing, sales and product support capabilities. In many instances, we will
have to make large expenditures for research and development and product
marketing in anticipation of future market requirements that are uncertain and
may undergo significant change prior to product introduction. The success of our
efforts will depend, to a considerable extent, on our ability to anticipate
future market requirements and successfully implement corresponding research and
development and marketing programs on a timely basis.
PATENTS AND PROPRIETARY RIGHTS
Although we use what we believe to be customary and appropriate measures to
protect Comverse's technology, these measures may not prove to be successful,
and our competitors may be able to develop similar technology independently.
Comverse currently holds eighteen United States patents and a number of foreign
patents and periodically files additional applications for patents on various
features of its products. No assurance can be given that claims allowed with
respect to any current or future patents will prove to be sufficiently broad to
protect our technology. In addition, no assurance can be given that our patents
will not be challenged, invalidated or circumvented, or that the rights granted
under the patents will provide significant benefits.
Comverse and its customers from time to time receive communications from
third parties, including some of our competitors, alleging infringement by our
products of certain of such parties' patent rights. Although such communications
are common in the computer and telecommunications industries, and we have in the
past been able to obtain any necessary licenses on commercially reasonable
terms, there can be no assurance that we would prevail in any litigation to
enjoin our sale of any products on the basis of such alleged infringement, or
that we would be able to license any valid patents on reasonable terms.
VOLATILITY OF SHARE PRICE
The trading price of Comverse's shares may be affected by the risk factors
described in this Prospectus as well as prevailing economic and financial trends
and conditions in the public securities markets. Share prices of companies in
technology businesses tend to exhibit a high degree of volatility. Shortfalls in
revenues or earnings from the levels anticipated by the public markets could
have an immediate and significant adverse effect on the trading price of our
shares in any given period. Such shortfalls may result from events that are
beyond our immediate control, can be unpredictable and, since a significant
proportion of our sales during each fiscal quarter often occurs in the latter
stages of the quarter, may not be discernible until the end of a financial
reporting period. These factors can contribute to the volatility of the trading
value of our shares regardless of our long-term prospects. Comverse's revenues
and earnings may be less predictable and more volatile than they have
historically been as a result of the concentration of Boston Technology's
business on a limited number of large customers. The trading price of our shares
may also be affected by developments, including reported financial results and
fluctuations in trading prices of the shares of other publicly-held companies in
the computer and
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telecommunications industries generally, and in our industry in particular,
which may not have any direct relationship with Comverse's business or
prospects.
YEAR 2000 READINESS
Comverse has undertaken a comprehensive program to evaluate "Year 2000
compliance" of its products and systems. We consider a product to be "Year 2000
compliant" if the product, when used properly and in conformity with the product
information supplied, will accurately store, display, process, provide and/or
receive data from, into and between the twentieth and twenty-first centuries,
including leap year calculations, provided that all other products used in
combination with the product properly exchange date data with it.
Although we believe that our current products generally either are, or upon
the completion of current modification programs will be, Year 2000 compliant, no
assurance can be given that our Year 2000 compliance efforts will prove to be
fully successful or that unanticipated costs and problems will not be
encountered in such efforts. In addition, we have determined that older
generations of certain of our products are not and cannot, without unreasonable
effort and expense, be made Year 2000 compliant. The costs incurred to date
related to the Year 2000 compliance program have been less than $7 million. The
program is expected to continue through fiscal 1999, but is not anticipated to
have a material adverse effect on our business or financial results.
It is possible that widespread litigation may be brought in the future
against vendors of products that are unable to properly manage data related to
the Year 2000. Our customer agreements typically contain provisions designed to
limit generally our liability for customer claims. It is possible, however, that
these measures will not provide protection from Year 2000 liability claims, as a
result of existing or future laws or unfavorable judicial decisions. Any such
claims could affect our business, financial condition and results of operations,
and result in increased warranty costs, customer satisfaction issues and
potential legal damages.
We have also undertaken a comprehensive program to address Year 2000
readiness in our internal systems. This program has been designed to address our
most critical internal systems first and to gather information regarding the
Year 2000 compliance of products supplied to us and with which our products are
integrated. We intend to have our critical internal systems in Year 2000
compliance by the end of the third quarter of 1999. These activities are
intended to encompass all major categories of systems in use by Comverse,
including manufacturing, engineering, sales, finance and human resources. We
have communicated with our significant suppliers and financial institutions to
determine the extent to which Comverse may be vulnerable to those third parties'
failure to remedy their own Year 2000 concerns, and have received assurances of
Year 2000 compliance from a number of those contacted. Most of the suppliers
under existing contracts with Comverse have no contractual obligation to provide
such information.
We currently expect that the total cost of our Year 2000 readiness programs
during the current fiscal year will not exceed $5,000,000. This cost estimate
does not include potential costs related to any legal claims or the costs of
internal software or hardware replaced in the normal course of business. The
total cost estimate is based on the current assessment of Comverse's Year 2000
readiness needs and is subject to change as the projects proceed.
While we currently expect that the Year 2000 issue will not pose
significant operational problems, failure to fully identify all Year 2000
dependencies in our systems and in the systems of our suppliers, customers and
financial institutions could have material adverse consequences, including
delays in the delivery or sale of products. We have under consideration various
contingency plans which will be developed as needed to assure continuing
operations in the event such problems arise.
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RECENT DEVELOPMENTS
On August 5, 1999, Comverse acquired InTouch Systems, Inc. ("InTouch").
This was effected through a merger of InTouch with and into Comverse Network
Systems, Inc., a wholly-owned subsidiary of Comverse, which has been accounted
for as a pooling of interests. In connection with this merger, former
stockholders of InTouch received an aggregate 339,601 shares of the Company's
Common Stock, which shares represent approximately 0.5% of the outstanding
Common Stock of the Company as of August 16, 1999. InTouch has developed a new
generation of intelligent voice-controlled technology that enables
telecommunications service providers products providing unified access and
control for network-based services and information - both telephony and
Internet.
USE OF PROCEEDS
The shares are being offered by this Prospectus only for the accounts of
the selling shareholders identified in this Prospectus or any supplement or
amendment hereto (the "Selling Shareholders"). We will not receive any proceeds
from the sale of the shares. See, "Selling Shareholders" below.
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SELLING SHAREHOLDERS
The Selling Shareholders obtained their Comverse shares when we acquired
InTouch upon completion of the merger on August 5, 1999. In connection with the
Agreement and Plan of Merger (the "Merger Agreement"), we agreed to register for
sale the shares of Common Stock issued by Comverse to the former stockholders of
InTouch in this Registration Statement of which this Prospectus forms a part.
Under the Merger Agreement, we agreed to keep the Registration Statement
effective (subject to our right to require the Selling Shareholders to suspend
their use of this Prospectus under certain circumstances), for as long as
reasonably specified in the plan of distribution contained in this Prospectus.
We have also agreed to bear certain related expenses and to indemnify each
Selling Shareholder against certain liabilities, including liabilities arising
under the federal securities laws. We have filed with the SEC the Registration
Statement of which this Prospectus forms a part to enable the sale by the
Selling Shareholders of their Comverse shares from time to time on the Nasdaq
National Market, in privately negotiated transactions or otherwise, as more
fully described under "Plan of Distribution" below.
The following table sets forth information with respect to the Selling
Shareholders and the respective number of shares of Common Stock beneficially
owned by each Selling Shareholder. Such information has been obtained from the
Selling Shareholders. Because the Selling Shareholders may sell all or some
portion of the shares of Common Stock covered under this Prospectus, no estimate
can be given as to the amount of shares of Common Stock that will be held by the
Selling Shareholders upon termination of any such sales. In addition, the
Selling Shareholders identified below may have sold, transferred or otherwise
disposed of all or a portion of their shares of Common Stock since the date on
which they provided the information regarding their shares in transactions
exempt from the registration requirements of the Securities Act.
<TABLE>
<CAPTION>
<S> <C> <C>
Shares Beneficially
Shares Beneficially Owned Owned Following
as of August 16, 1999 and Completion of this
Selling Shareholder Offered Hereby Offering(1)
- ---------------------------------------------
Michael A. Krasner 248,556 0
- ---------------------------------------------
Lawrence A. Denenberg 61,287 0
- ---------------------------------------------
Edward Roberts 15,132 0
- ---------------------------------------------
Chris Schmandt 8,277 0
- ---------------------------------------------
Thomas Boutureira 3,783 0
- ---------------------------------------------
Stephen Gildea 1,513 0
- ---------------------------------------------
Fredric M. White 628 0
- ---------------------------------------------
Sheldon L. Dinkes 425 0
- ---------------------------------------------
______ _____
- ---------------------------------------------
339,601 0
</TABLE>
(1) Assumes that the Selling Shareholders sell all the shares of Common Stock
offered hereby.
11
<PAGE>
Prior to the Merger, Michael A. Krasner and Lawrence A. Denenberg were
directors and executive officers of InTouch. After the Merger, Michael A.
Krasner and Lawrence A. Denenberg will remain as employees of the Company but
will not serve as directors or officers of the Company. Except as disclosed
above, none of the Selling Shareholders has, or within the past three years has
had, any position, office or other material relationship with the Company or any
of its predecessors or affiliates.
Generally, only Selling Shareholders identified in the foregoing table who
beneficially own the shares of Common Stock set forth opposite their respective
names may sell such shares pursuant to the Registration Statement of which this
Prospectus forms a part. The Company may from time to time include additional
Selling Shareholders in supplements or amendments to this Prospectus.
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 100,000,000 shares
of Common Stock, par value $.10 per share, and 2,500,000 shares of preferred
stock, par value $.01 per share ("Preferred Stock"). As of August 16, 1999,
there were issued and outstanding 71,067,786 shares of Common Stock. As of July
31, 1999, 11,342,302 shares were reserved for issuance pursuant to outstanding
options and warrants, 3,770,492 shares were reserved for issuance pursuant to
the Company's 5 3/4% Convertible Subordinated Debentures due 2006 and 6,976,744
shares were reserved for issuance pursuant to the Company's 4 1/2% Convertible
Subordinated Debentures due 2005. No shares of Preferred Stock have been issued
to date.
All outstanding shares of Common Stock are fully paid and nonassessable.
Holders of Common Stock have no preemptive, redemption or conversion rights, and
are entitled to one vote for each share held on each matter submitted to a vote
of shareholders. Cumulative voting for the election of directors is not
permitted. Holders of the Common Stock are entitled to receive ratably such
dividends as may be declared by the Board of Directors out of funds legally
available therefor, subject to the rights and preferences of the holders of any
Preferred Stock. On liquidation of the Company, after payment of all
indebtedness and the liquidation preference to holders of any Preferred Stock,
the assets of the Company will be distributed pro-rata to the holders of the
Common Stock.
The Company may issue the Preferred Stock in one or more series. The Board
of Directors is authorized, without approval of shareholders, to determine, with
respect to each series of Preferred Stock which may be issued, the powers,
designations, preferences, and rights of the shares of such series and the
qualifications, limitations, or restrictions thereof, including any dividend
rate, redemption rights, liquidation preferences, sinking fund terms, conversion
rights, voting rights and any other preferences or special rights and
qualifications. The effects of any issuance of the Preferred Stock upon the
rights of holders of the Common Stock depends upon the respective powers,
designations, preferences, rights, qualifications, limitations and restrictions
of the shares of one or more series of Preferred Stock as determined by the
Board of Directors. Such effects might include dilution of the voting power of
the Common Stock, the subordination of the rights of holders of Common Stock to
share in the Corporation's assets upon liquidation, and reduction of the amount
otherwise available for payment of dividends on Common Stock.
American Stock Transfer & Trust Company, New York, New York, serves as the
transfer agent and registrar for the Common Stock.
12
<PAGE>
PLAN OF DISTRIBUTION
The Selling Shareholders may sell the Comverse shares covered by this
Prospectus from time to time at market prices prevailing at the time of sale, at
prices related to such prevailing market prices or at negotiated prices. The
Selling Shareholders may offer their shares for sale in one or more of the
following transactions:
o........on the Nasdaq National Market
o........through the facilities of any national securities exchange or
U.S. automated inter-dealer quotation system of a registered national
securities association on which any of the Comverse shares are then
listed, admitted to unlisted trading privileges or included for
quotation
o........in privately negotiated transactions, or
o........in a combination of such methods of sale.
The Selling Shareholders may sell their shares directly, or indirectly
through underwriters, broker-dealers or agents acting on their behalf, and in
connection with such sales, the broker-dealers or agents may receive
compensation in the form of commissions, concessions, allowances or discounts
from the Selling Shareholders and/or the purchasers of the shares for whom they
may act as agent or to whom they sell the shares as principal or both (which
commissions, concessions, allowances or discounts might be in excess of
customary amounts thereof). Sales will be made only through broker-dealers
registered as such in a subject jurisdiction or in transactions exempt from such
registration. We have not been advised of any definitive selling arrangement at
the date of this Prospectus between any Selling Shareholder and any
broker-dealer or agent. We will not receive any of the proceeds from the sale of
the shares by the Selling Shareholders.
In connection with the distribution of the Comverse shares, certain of the
Selling Shareholders may enter into hedging transactions with broker-dealers. In
connection with such transactions, broker-dealers may engage in short sales of
the Comverse shares in the course of hedging the positions they assume with the
Selling Shareholders. The Selling Shareholders may also sell the Comverse
shares short and redeliver such shares to close out the short positions. The
Selling Shareholders may also enter into option or other transactions with
broker-dealers which require the delivery of the Comverse shares to the
broker-dealer. The Selling Shareholders may also loan or pledge the Comverse
shares to a broker-dealer and the broker-dealer may sell the shares so loaned,
or upon a default, the broker-dealer may effect sales of the pledged shares.
The Selling Shareholders and any dealer acting in connection with the
offering or any broker executing a sell order on behalf of a Selling Shareholder
may be deemed to be "underwriters" within the meaning of the Securities Act, in
which event any profit on the sale of shares by a Selling Shareholder and any
commissions or discounts received by any such broker or dealer may be deemed to
be underwriting compensation under the Securities Act. In addition, any such
broker or dealer may be required to deliver a copy of this Prospectus to any
person who purchases any of the shares from or through such broker or dealer.
Under the Merger Agreement, Comverse is required to file the reports
required to be filed by it under the Securities Act and the Exchange Act in a
timely manner and to take such further action as any holder of securities
covered by the Registration Rights Agreements may reasonably request to enable
such holder to sell his or her securities without registration, including making
publicly available the information necessary to permit sales of the securities
pursuant to Rules 144 and 144A under the Securities Act.
Under the Merger Agreement, Comverse is required to bear all fees and
expenses incurred in connection with the registration of the Comverse shares,
except for any underwriting discounts and sales commissions and fees and
expenses of counsel and other agents of the Selling Shareholders. Each of
Comverse and the Selling Shareholders has agreed to indemnify the other against
certain civil liabilities, including certain liabilities arising under the
Securities Act and Exchange Act.
13
<PAGE>
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for the Company by William F. Sorin,
attorney-at-law, 823 Park Avenue, New York, New York 10021. Mr. Sorin is an
officer and director of the Company and the beneficial owner of 6,562 shares of
Common Stock issuable upon the exercise of options granted by the Company.
14
<PAGE>
EXPERTS
The consolidated financial statements of the Company and its subsidiaries
as of January 31, 1998 and 1999 and for the years ended December 31, 1996 and
1997, and January 31, 1999, except for Boston Technology, Inc. and its
subsidiaries for the year ended January 31, 1997, incorporated by reference
herein from the Company's Annual Report on Form 10-K for the year ended January
31, 1999, have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report which is incorporated by reference herein. The
consolidated financial statements of Boston Technology, Inc. and its
subsidiaries (consolidated with those of the Company) for the year ended January
31, 1997 have been audited by PricewaterhouseCoopers LLP, independent public
accountants, as stated in their report which is incorporated by reference herein
from the Company's Annual Report on Form 10-K for the year ended January 31,
1999. The consolidated financial statements of the Company and its subsidiaries
referred to above have been incorporated by reference herein in reliance upon
the respective reports of such firms given their authority as experts in
accounting and auditing.
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
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YOU SHOULD RELY ONLY ON THE INFORMATION
PROVIDED OR INCORPORATED BY REFERENCE IN THIS 339,601 SHARES
PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT
AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH
ADDITIONAL OR DIFFERENT INFORMATION. THE COMVERSE
COMMON STOCK IS NOT BEING OFFERED IN ANY TECHNOLOGY, INC.
STATE WHERE THE OFFER IS NOT PERMITTED. YOU
SHOULD NOT ASSUME THAT THE INFORMATION IN
THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE
AS OF ANY DATE OTHER THAN THE DATE ON THE COMMON STOCK
FRONT OF SUCH DOCUMENT.
__________________
TABLE OF CONTENTS
Page
About This Prospectus...........................1
Where You Can Find More Information.............1 _____________________
Summary- The Company............................3
Risk Factors....................................4
Recent Developments............................10 PROSPECTUS
Use Of Proceeds................................10 September 16, 1999
Selling Shareholders...........................11
Description Of Capital Stock...................12
Plan Of Distribution...........................13
Legal Matters..................................14
Experts........................................15
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</TABLE>
