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Lehman Downgrades Comverse Technology

Comverse Technology (CMVT) reported fourth quarter EPS of $0.06. The company says it sees a loss of $0.06 per share in the first quarter.

Lehman Brothers downgraded the stock to buy from strong buy on the news. Analyst Tim Luke says the fourth quarter was in line with estimates, but the company sharply lowered guidance due to deteriorating carrier capital expenditures. He believes order weakness is particularly in Europe and the Asia-Pacific region. Management did not provide 2002 guidance, he say.

Luke cut his EPS estimates from $0.60 in fiscal year 2003 (January) to a $0.09 loss per share, and from EPS of $0.74 in fiscal year 2004 to $0.20. He now sees $908 million in sales in fiscal year 2003 sales, and $1 billion in fiscal year 2004. He expects the shares to find support at $12-$13. The company's long-term position remains intact, he says, but with few near term catalysts, he downgraded the stock. He has a $16-$17 price target, or 2 times sales.

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