Comverse Tech (CMVT) Shares No Longer Care About the Kobi Alexander Nimibia Scandal

As pressure remains on Comverse Tech’s (CMVT) ex-CEO and current fugitive Kobi Alexander to be extradited from Nimibia, you might wonder why shares of the ex-high-flyer have stayed toward the higher-end of a trading band.  Shares have spent most of the last year bumping back and forth between an $18.00 to $23.00 range with brief time periods outside of it (including today with a $23.05 high).  This looks like the past is staying a press scandal rather than shareholders feeling there will be more corporate scandals ahead.

The company has been very delinquent filings that it trades on the pink sheets.  But what is amazing is that while the press scandal is being touted in the media with much more fervor this week, shares are still up more than 10% in the last 3-months and up 35% from the 52-week lows.  Law firms are suing Kobi Alexander and the company, and the government wants Kobi Alexander back.  Yet mysteriously shares are holding up.  Sure, shares are down from the highs of the last two-years, but are up more than 200% from the 5-year lows.  Compared to the tech bubble days, you don’t even want to know how far down the shares are.

Inside the company, it just completed a smaller merger.  It is expected that there will be layoffs. The company is still signing contracts. It brought in new management with a new CEO (former AT&T Wireless multimedia head) and appointed outside directors.  Its former senior general counsel was sentenced to a year and a day in jail last month.  Some even think the company could be broken up after the issues are resolved.

But even when a ‘real’ financial position cannot be easily evaluated, it’s hard not to think that the company will easily survive and move on, and that at least some feel there is value inside the vortex.  Otherwise shares would be putting in new lows day after day instead of hanging up here.  While compiling this earlier, it looks like Mr. Alexander’s hearing has been further delayed until June 25th.  It looks like many investors are able to discern the difference between a past scandal and a perceived crisis.  At least that is what the tape is saying.

Jon C. Ogg
June 8, 2007

Jon Ogg can be reached at [email protected]; he does not own securities in the companies he covers.