Amdocs Guides, Stock Dives

After an impressive 2006 that saw major rises in revenues and share price, as well as some useful looking acquisitions, telecom software and services giant Amdocs Ltd. (NYSE: DOX) came down to earth with a thump today as its share price sank more than 10 percent following a revenue guidance revision.

While the company said revenues for its first fiscal quarter (to December 31, 2006) are set to meet the guidance level of about $690 million, revenues for the whole fiscal year are now expected to be in the range of $2.83 billion to $2.91 billion, down from the $2.89 billion to $2.97 billion range stated in early November 2006. (See Amdocs Lowers Guidance.)

News of the revision knocked $4.13 (10.5%) off the vendor's stock, sending it down to $35.20.

The alteration comes after an upbeat 2006, during which Amdocs reported revenue growth quarter after quarter, and saw its share price rise from $27.24 at the start of January and end at $38.75 at the end of December. (See Amdocs Reports Q4, Amdocs Reports Q3, and Amdocs Reports Q2.)

Amdocs has also been active in the ongoing consolidation of the telecom software and service delivery sectors in the past year or so, splashing more than $700 million to buy content download system specialist Qpass ($275 million), inventory management OSS player Cramer Systems ($375 million), and integrated billing and customer care vendor SigValue Technologies ($54 million). (See Amdocs Continues Spending Spree, Amdocs Snaps Up Cramer, and Amdocs Buys Into Content Delivery.)

Despite the lower guidance, Amdocs is still on course to increase its annual sales. For the full fiscal year to September 30, 2006, Amdocs reported net income of $319 million from revenues of $2.48 billion, up 22 percent year on year. Those revenues and its broad product set, based on its traditional billing systems strength, put it in the elite group of top-tier telecom software vendors. (See M&A Reshapes OSS Sector and Who Makes What: OSS .)

But while the new $2.83 billion to $2.91 billion range represents a year-on-year hike, analysts had been forecasting fiscal 2007 revenues of $2.93 billion.

In the vendor's statement, CEO Dov Baharav is quoted as saying there is still demand for the company's goods and services from major carriers, "but not at the same pace that we had expected."

While the climb-down isn't explained, the statement notes specifically that the integration of Cramer -- now a vital part of Amdocs' OSS armory, with multiple Tier 1 deployments around the world in next-generation network buildouts -- "is proceeding according to plan," and that Cramer is "consistently contributing new wins." (See Telstra Outlines Massive OSS Project, Telekom Austria Deploys Cramer OSS, Telefónica Picks IBM, Cramer, and BT Awards Monster OSS Deal.)

Amdocs representatives did not answer their phones or respond to emails about any specific reasons for the revised guidance, including whether the lower revenue expectation is linked to any of the newly acquired assets.

They also weren't able to confirm or deny reports from Israel's Yedioth Ahronoth newspaper that Amdocs is cutting about 4 percent of its staff, more than 600 employees, because of increasing costs at some major contracts.

Amdocs will report its first-quarter financials after the markets close on January 17.

— Ray Le Maistre, International News Editor, Light Reading