BUSINESS COMBINATIONS

The Company did not execute any business combinations during the six months ended July 31, 2012.

Verint Segment

Vovici Acquisition

On August 4, 2011, Verint acquired all of the outstanding shares of Vovici Corporation (“Vovici”), a U.S.-based provider of online survey management and enterprise feedback solutions for total consideration of $66.1 million. Included in this consideration was $9.9 million for the fair value of potential additional cash payments to the former Vovici shareholders of up to approximately $19.1 million, payment of which is contingent upon the achievement of certain performance targets over the period from the acquisition date through January 31, 2013.

At each reporting date, the contingent consideration obligations associated with business combinations are revalued to their estimated fair values and any increases or decreases in fair values are reflected within “Selling, general and administrative” expenses in the Company’s condensed consolidated statements of operations.

For the three and six months ended July 31, 2012, the Company recorded a benefit of approximately $4.0 million and $3.7 million, respectively, within “Selling, general and administrative” expenses for changes in the fair value of the Vovici contingent consideration obligation, which primarily reflected the impact of revised expectations of achieving the performance targets. As of July 31, 2012, the fair value of this contingent consideration was $3.5 million and no payments had been made to the former Vovici shareholders under this arrangement.

Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to the acquisition of Vovici, totaled $0.2 million for the six months ended July 31, 2012, the majority of which were incurred during the three months ended April 30, 2012. Such costs totaled $1.3 million for the six months ended July 31, 2011, all of which were incurred during the three months ended July 31, 2011. All transaction and related costs were expensed as incurred and recorded within “Selling, general and administrative” expenses.

Global Management Technologies Acquisition

On October 7, 2011, Verint acquired all of the outstanding shares of Global Management Technologies Corporation (“GMT”), a U.S.-based provider of workforce management solutions whose software and services are widely used by organizations, particularly in retail branch banking environments for total consideration of $36.6 million. Included in this consideration was $12.0 million for the fair value of potential additional cash payments to the former GMT shareholders of up to approximately $17.4 million, payment of which is contingent upon the achievement of certain performance targets over the period from the acquisition date through January 31, 2014.

For the three and six months ended July 31, 2012, the Company recorded benefits of $0.9 million and $4.5 million, respectively, within “Selling, general and administrative” expenses for changes in the fair value of the GMT contingent consideration obligation, which primarily reflected the impacts of revised expectations of achieving the performance targets. As of July 31, 2012, the fair value of this contingent consideration was $5.1 million, and no payments had been made to the former GMT shareholders under this arrangement.

Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to the acquisition of GMT, totaled $0.3 million for the six months ended July 31, 2012, the majority of which were incurred during the three months ended April 30, 2012. Such costs totaled $0.1 million for the six months ended July 31, 2011, all of which were incurred during the three months ended July 31, 2011. All transaction and related costs were expensed as incurred and recorded within “Selling, general and administrative” expenses.

Other Business Combinations

During the fiscal year ended January 31, 2012, Verint executed five additional business combinations for total combined consideration of $55.2 million, including $20.5 million for the fair value of potential additional cash payments to the respective former shareholders or asset owners aggregating up to approximately $41.0 million, payment of which is contingent upon the achievement of certain performance targets over periods extending through January 31, 2015. Two of these combinations were acquisitions of assets in transactions that qualified as business combinations.

For the three and six months ended July 31, 2012, the Company recorded net charges of $0.3 million and $0.6 million, respectively, within “Selling, general and administrative” expenses for changes in the aggregate fair values of the contingent consideration obligations associated with these acquisitions, reflecting the impact of revised expectations of achieving the performance targets, as well as decreases in the discount periods since the acquisition dates. As of July 31, 2012, the aggregate fair value of the contingent consideration obligations associated with these acquisitions was $16.6 million. During the three months ended July 31, 2012, Verint made $4.2 million of payments to the respective former shareholders or asset owners under these arrangements. No such payments were made during the three months ended April 30, 2012.

Transaction and related costs, consisting primarily of professional fees and integration expenses, directly related to these acquisitions, totaled $0.3 million and $0.6 million for the three and six months ended July 31, 2012, respectively. Such costs totaled 1.5 million for the six months ended July 31, 2011, the majority of which were incurred during the three months ended July 31, 2011. All transaction and related costs were expensed as incurred and recorded within "Selling, general and administrative" expenses.

As of January 31, 2012, the tax deductibility of $21.4 million of the goodwill associated with these business combinations, was still being assessed. Purchase price allocation adjustments, as discussed below, as well as fluctuations in foreign currency exchange rates reduced this goodwill to $16.5 million as of July 31, 2012, and the Company has concluded that $6.4 million of this goodwill is tax deductible, and $10.1 million is not tax deductible.

In connection with one of the foregoing business combinations, Verint has evaluated and continues to evaluate the impact of certain liabilities associated with pre-acquisition business activities of the acquired company. As of January 31, 2012, the current and long-term liabilities for these matters were $4.0 million and $4.7 million, respectively. Corresponding indemnification assets were reflected within current and long-term assets, recognizing the selling shareholders’ contractual obligation to indemnify Verint for these pre-acquisition liabilities, and were measured on the same basis as the corresponding liabilities. As of July 31, 2012, the current and long-term liabilities for these matters and corresponding indemnification assets, were $3.2 million and $3.9 million, respectively. The changes in these amounts during the three and six months ended July 31, 2012 reflect the derecognition of certain liabilities and corresponding indemnification assets and the impact of foreign currency exchange rate fluctuations. These changes did not impact the Company's condensed consolidated statements of operations for the three and six months ended July 31, 2012.

The Company is continuing to gather and assess information in this regard, and changes to the amounts previously recorded resulting from facts and circumstances that existed as of the acquisition date regarding these matters, if any, will be included in the Company’s results of operations.

Purchase Price Allocations

The purchase price allocations for acquisitions completed during the fiscal year ended January 31, 2012 were provisional and were based on the information that was available to the Company as of the respective acquisition dates, and represented the Company's best estimates of the fair values of the assets acquired and liabilities assumed.

No purchase price allocation adjustments were identified during the three months ended July 31, 2012. Based upon additional information obtained during the three months ended April 30, 2012 about facts and circumstances that existed as of the respective acquisition dates, the Company adjusted the purchase price allocations for several acquisitions completed during the fiscal year ended January 31, 2012, as described below:


•	For the Vovici purchase price allocation, the Company reduced certain liabilities by $0.2 million and recorded a corresponding reduction of goodwill.

•

For the purchase price allocation associated with Verint's August 2, 2011 acquisition, the Company adjusted certain acquisition-date deferred income taxes, which also required the Company to change several assumptions in the discounted cash flow models used to estimate the fair values of certain identified intangible assets. As a result, the estimated acquisition-date fair values of the developed technology and customer relationship intangible assets identified in this acquisition decreased by $0.3 million and $0.4 million, respectively, net deferred income tax liabilities decreased by $3.8 million, and goodwill decreased by $3.1 million. For the purchase price allocation associated with Verint's January 5, 2012 acquisition, the Company recorded minor refinements to the purchase price and to certain liabilities, which resulted in a $0.1 million increase in goodwill.

Changes to a provisional purchase price allocation resulting from additional information obtained about facts and circumstances that existed as of the acquisition date are adjusted retrospectively to the condensed consolidated financial statements. Accordingly, the condensed consolidated balance sheet as of January 31, 2012 has been revised to reflect the impacts of these adjustments. These adjustments resulted in decreases in goodwill of $2.9 million, intangible assets, net of $0.6 million, accounts payable and accrued expenses of $0.2 million, and other liabilities of $3.1 million, and a $0.2 million increase to other assets. Accounts payable was increased by a negligible amount.

These adjustments did not materially impact the Company's condensed consolidated statements of operations.

The purchase price allocation for the acquisition of GMT did not change during the six months ended July 31, 2012.

The purchase price allocations for all acquisitions executed during the fiscal year ended January 31, 2012 were complete as of July 31, 2012.

The following table sets forth the components and the allocations of the purchase price for the acquisition of Vovici, as well as the combined purchase prices for the Company's other individually insignificant acquisitions completed during the fiscal year ended January 31, 2012, reflecting all purchase price allocation adjustments identified through July 31, 2012:



	Vovici			Other
	(In thousands)
Components of purchase price:
Cash and cash equivalents	$	55,708		$	33,835
Fair value of contingent consideration	9,900			20,504
Fair value of stock options	60			—
Bank debt, prepaid at closing	435			—
Other purchase price adjustments	—			816
Total purchase price	$	66,103		$	55,155
Allocation of purchase price:
Net tangible assets (liabilities):
Cash and cash equivalents	$	179		$	4,614
Accounts receivable	1,106			842
Other current assets	5,219			11,036
Other assets	913			5,579
Current and other liabilities	(2,931		)	(15,419		)
Deferred revenue	(2,264		)	(944		)
Bank debt	—			(3,330		)
Deferred income taxes - long-term	(6,021		)	186
Net tangible (liabilities) assets	(3,799		)	2,564
Identifiable intangible assets:
Developed technology	11,300			9,743
Customer relationships	15,400			7,040
Trademarks and trade names	1,700			1,350
In-process research and development assets	—			2,500
Other identifiable intangible assets	—			1,421
Total identifiable intangible assets	28,400			22,054
Goodwill	41,502			30,537
Total purchase price	$	66,103		$	55,155

For the Year Ended January 31, 2011

On February 4, 2010, Verint acquired all of the outstanding shares of Iontas Limited (“Iontas”), a provider of desktop analytics solutions.

Consideration for the acquisition of Iontas included contingent milestone-based payments tied to certain performance targets being achieved over the two-year period following the acquisition date. As of January 31, 2012, the estimated fair value of the remaining contingent consideration obligation was $1.7 million, which was subsequently paid to the former Iontas shareholders during the three months ended April 30, 2012. Verint has no further contingent consideration obligations for this business combination. For the three and six months ended July 31, 2011, increases of $0.1 million and $0.2 million, respectively in the fair value of this contingent consideration obligation were recorded as a charge to “Selling, general and administrative” expenses.

In December 2010, Verint acquired certain technology and other assets in a transaction that qualified as a business combination. The fair value of the liability for contingent consideration related to this acquisition increased by $1.9 million during the six months ended July 31, 2011, resulting in a corresponding charge recorded within “Selling, general and administrative” expenses for that period. Substantially all of the increase occurred during the three months ended April 30, 2011. The earned contingent consideration related to this acquisition was paid to the sellers during the three months ended July 31, 2011.

Pro Forma Information

The following table provides unaudited pro forma financial information attributable to Comverse Technology, Inc. for the three and six months ended July 31, 2011, as if Vovici and GMT had been acquired on February 1, 2011. These unaudited pro forma results reflect certain adjustments related to these acquisitions, such as amortization expense on finite-lived intangible assets acquired from Vovici and GMT. The unaudited pro forma results do not include any operating efficiencies or potential cost savings which may result from these business combinations. Accordingly, such unaudited pro forma amounts are not necessarily indicative of the results that actually would have occurred had the acquisitions occurred on February 1, 2011, nor are they indicative of future operating results. The pro forma impact of the other business combinations completed during the fiscal year ended January 31, 2012 was not material to the Company’s historical condensed consolidated operating results and is therefore not presented.



	Three Months Ended July 31, 2011			Six Months Ended July 31, 2011
	(In thousands)

Total revenue	$	381,858		$	725,331
Net loss attributable to Comverse Technology, Inc.	$	(41,979	)	$	(104,092	)