Comverse Technology Second Quarter Fiscal 2005 Results: Sales Of $285,835,000, Up 22% Year-Over-Year; GAAP Earnings Up 161% , Pro Forma Earnings Up 122%

Business Wire, Sept 7, 2005

NEW YORK -- Comverse Technology, Inc. (NASDAQ: CMVT) announced sales of $285,835,000 for the second quarter of fiscal year 2005, ended July 31, 2005, an increase of 22.5% compared to sales of $233,427,000 for the second quarter of fiscal year 2004, ended July 31, 2004. Net income on a generally accepted accounting principles ("GAAP") basis for the second quarter of fiscal 2005 was $34,814,000 ($0.16 per diluted share), up 161% compared to net income of $13,327,000 ($0.06 per diluted share) for the second quarter of fiscal 2004. Net income on a pro forma basis was $30,465,000 ($0.14 per diluted share) in the second quarter of fiscal 2005, up 122% compared to pro forma net income of $13,725,000 ($0.07 per diluted share) in the second quarter of fiscal 2004. A reconciliation between results on a GAAP basis and results on a pro forma basis is provided in a table immediately following the Pro Forma Consolidated Statements of Income.

Kobi Alexander, Chairman and CEO of Comverse Technology, stated, "We achieved our eleventh consecutive quarter of sequential sales growth, and continued to expand our operating margin. Comverse, our network systems division, saw demand for its Total Communication portfolio, which enables a broad range of telecommunications applications, including call answering and call completion services, advanced messaging and other data applications such as wireless content delivery, and real-time billing. Our Verint Systems unit continued to expand its activities providing actionable intelligence for security and business intelligence applications."

The Company ended the quarter with cash and cash equivalents, bank time deposits and short-term investments of $2,293,240,000, working capital of $2,266,571,000, total assets of $3,052,425,000 and stockholders' equity of $1,888,447,000, all of which represent record levels.

Financial highlights at and for the six and three month periods ended July 31, 2005 and prior year comparisons are as follows:

Consolidated Statements of Income (GAAP basis)
                (In thousands, except per share data)
----------------------------------------------------------------------
                                Six Months Ended   Three Months Ended
                                   (unaudited)         (unaudited)
                               ------------------- -------------------
                               July 31,  July 31,  July 31,  July 31,
                                 2004      2005      2004      2005
------------------------------ --------- --------- --------- ---------
Sales                          $454,822  $558,636  $233,427  $285,835
------------------------------ --------- --------- --------- ---------
Cost of sales                   182,716   220,949    93,124   114,566
------------------------------ --------- --------- --------- ---------
Research and development, net   112,069   128,184    56,527    63,449
------------------------------ --------- --------- --------- ---------
Selling, general and
 administrative                 140,002   165,483    71,507    83,444
------------------------------ --------- --------- --------- ---------
In-process research and
 development and other
 acquisition-related charges      4,635         -         -         -
------------------------------ --------- --------- --------- ---------
Workforce reduction,
 restructuring and impairment
 charges (credits)                  164      (253)     (534)     (100)
------------------------------ --------- --------- --------- ---------
Income from operations           15,236    44,273    12,803    24,476
------------------------------ --------- --------- --------- ---------
Interest and other income, net   15,429    34,317     7,784    20,907
------------------------------ --------- --------- --------- ---------
Income before income tax
 provision, minority interest
 and equity in the earnings
 (losses) of affiliates          30,665    78,590    20,587    45,383
------------------------------ --------- --------- --------- ---------
Income tax provision              5,160    11,180     3,668     6,227
------------------------------ --------- --------- --------- ---------
Minority interest and equity
 in the earnings (losses) of
 affiliates                      (5,177)   (8,335)   (3,592)   (4,342)
------------------------------ --------- --------- --------- ---------
Net income                      $20,328   $59,075   $13,327   $34,814
------------------------------ --------- --------- --------- ---------

----------------------------------------------------------------------
Earnings per share:
------------------------------ --------- --------- --------- ---------
Diluted (1)                       $0.10     $0.27     $0.06     $0.16
------------------------------ --------- --------- --------- ---------
Basic                             $0.10     $0.30     $0.07     $0.17
------------------------------ --------- --------- --------- ---------

----------------------------------------------------------------------
Weighted average shares:
------------------------------ --------- --------- --------- ---------
Diluted                         202,114   213,537   201,946   214,081
------------------------------ --------- --------- --------- ---------
Basic                           195,136   199,379   195,467   199,893
------------------------------ --------- --------- --------- ---------

(1) Net income for purposes of calculating diluted earnings per
share includes the dilutive effects of subsidiary options of
approximately $474 and $259 for the six and three month periods ended
July 31, 2005, respectively, and approximately $394 and $243 for the
six and three month periods ended July 31, 2004, respectively.