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Comptel Under the Cosh

Ray Le Maistre
1/27/2012

Finnish Service Provider Information Technology (SPIT) vendor Comptel Corp. (Nasdaq, Helsinki: CTL1V) showed signs of the market malaise that hit other telecom technology suppliers last year with preliminary financial guidance for 2011 that showed a slight dip in year-on-year revenues.

But that's not the company's only concern: It also ended the year with a legal challenge from Cisco Systems Inc. (Nasdaq: CSCO). More on that in a moment.

The preliminary numbers (with the full 2011 financial report to follow on Feb. 10) show that 2011 revenues were down 1.4 percent to €76.8 million (US$101 million), while operating profit after one-time gains was €2.8 million ($3.7 million), about 69 percent down from a year ago.

CEO Juhani Hintikka still has his work cut out, then, to shift the company into a higher gear and take the annual revenues beyond €100 million ($131 million). (See Comptel Looks to Shift Up a Gear.) Legal challenge
But now Hintikka and his team have another distraction in the form of Cisco, which acquired some of Comptel's OSS assets in the fall of 2011. (See Cisco, Comptel Strike a SPIT Deal.)

The IP networking giant, Comptel notes on its website, has filed a request for arbitration against Comptel in the London Court of International Arbitration "concerning Comptel's use of a certain sub-set of Axioss software that was sold to Cisco and subsequently licensed back to Comptel for use in the current release of Comptel Fulfillment."

Comptel notes that it "regards Cisco's claims entirely against the recent agreements concluded by Comptel and Cisco for the sale of Axioss software to Cisco," and states it will "vigorously defend its position and protect the interests of its customers and partners."

The move could hamper Comptel's efforts, believe analysts at SEB Enskilda. In a research note the investment bank wrote that, even though the case impacts just one product that's due to be replaced in the coming months, "the uncertainty and a potentially lengthy court case will burden the stock … Comptel is now a less likely takeover target. The SEB Enskilda team noted that Comptel was already a "turnaround story with high risk … The Cisco case just elevates the risks."

Comptel's share price on the Helsinki exchange is currently €0.58, giving the company a market capitalization of €62 million ($81.7 million).

Comptel still pressing on
Hintikka is still focused on finding ways to help expand Comptel and has pressed ahead with a targeted acquisition of specialist Finnish vendor Xtract Oy to help broaden the company's capabilities in analytics, a key area of SPIT development. (See Comptel to Buy Xtract for €3.1M, Coming in 2020: The Web 3.0 Experience, Turf Wars Threaten Telco CEM Initiatives and Waking Up to the Power of SPIT.)

Comptel says that the acquisition is part of its strategy to build "an integrated offering for service providers to manage the customer experience and to drive new revenues from their subscriber base," giving it a stronger pitch in the increasingly important customer experience management sector. (See Ericsson Shines a Light on CEM, Barcelona's New Battleground and CEM Set for Center Stage.)

— Ray Le Maistre, International Managing Editor, Light Reading

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