-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MrR8RZYRJ8ccKw9xQ6WGjm4OsKs2tqgqJxUN2f/eR7q98piKzwLJYGYiVK33EvAp /n1SzAEWF1XucMoxmChDlg== 0000909518-00-000776.txt : 20001207 0000909518-00-000776.hdr.sgml : 20001207 ACCESSION NUMBER: 0000909518-00-000776 CONFORMED SUBMISSION TYPE: 424B2 PUBLIC DOCUMENT COUNT: 1 FILED AS OF DATE: 20001206 FILER: COMPANY DATA: COMPANY CONFORMED NAME: COMVERSE TECHNOLOGY INC/NY/ CENTRAL INDEX KEY: 0000803014 STANDARD INDUSTRIAL CLASSIFICATION: TELEPHONE & TELEGRAPH APPARATUS [3661] IRS NUMBER: 133238402 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 424B2 SEC ACT: SEC FILE NUMBER: 333-50458 FILM NUMBER: 783905 BUSINESS ADDRESS: STREET 1: 170 CROSSWAYS PARK DR CITY: WOODBURY STATE: NY ZIP: 11797 BUSINESS PHONE: 5166777200 MAIL ADDRESS: STREET 1: 170 CROSSWAYS PARK DRIVE STREET 2: 170 CROSSWAYS PARK DRIVE CITY: WOODBURY STATE: NY ZIP: 11797 424B2 1 0001.txt ================================================================================ PROSPECTUS COMVERSE TECHNOLOGY, INC. 28,376 Shares of Common Stock --------------------- The shareholders identified on page 11 are offering to sell up to 28,376 shares of our common stock. We will not receive any of the proceeds from such sales. Our common stock is traded on the Nasdaq National Market under the symbol "CMVT." On December 4, 2000, the closing price of the common stock was $95.75 per share. YOU SHOULD CONSIDER CAREFULLY THE RISK FACTORS BEGINNING ON PAGE 4 BEFORE MAKING A DECISION TO PURCHASE OUR STOCK. --------------- NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF THIS PROSPECTUS IS ACCURATE OR COMPLETE. IT IS ILLEGAL FOR ANY PERSON TO TELL YOU OTHERWISE. --------------- The date of this prospectus is December 5, 2000. NY2:\989377\01\37994.0003 YOU SHOULD ONLY RELY ON THE INFORMATION INCORPORATED BY REFERENCE OR PROVIDED IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH DIFFERENT INFORMATION. THE COMMON STOCK IS NOT BEING OFFERED IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF SUCH DOCUMENT. TABLE OF CONTENTS PAGE ABOUT THIS PROSPECTUS.....................................................1 WHERE YOU CAN FIND MORE INFORMATION.......................................1 INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE...........................1 FORWARD LOOKING STATEMENTS................................................2 ABOUT COMVERSE ...........................................................3 RISK FACTORS ........................................................4 RECENT DEVELOPMENTS.......................................................9 USE OF PROCEEDS ..........................................................9 SELLING SHAREHOLDERS.....................................................10 PLAN OF DISTRIBUTION.....................................................13 LEGAL MATTERS ...........................................................14 EXPERTS .................................................................14 WHENEVER WE REFER TO THE "COMPANY" OR TO "US," OR USE THE TERMS "WE" OR "OUR" IN THIS PROSPECTUS, WE ARE REFERRING TO COMVERSE TECHNOLOGY, INC., A NEW YORK CORPORATION, AND OUR DIRECTLY OR INDIRECTLY OWNED SUBSIDIARIES. i ABOUT THIS PROSPECTUS This prospectus is a part of a registration statement that we have filed with the Securities and Exchange Commission utilizing a "shelf registration" process. You should read this prospectus and any supplement together with additional information described under "Where You Can Find More Information" and the information we incorporate by reference in this prospectus described under the heading "Incorporation of Certain Documents by Reference." WHERE YOU CAN FIND MORE INFORMATION We file annual, quarterly and other reports, proxy statements and other information with the Commission. You may read and copy any document we file at the Commission's public reference facilities located at 450 5th Street, N.W., Washington, D.C. 20549, at Seven World Trade Center 13th Floor, New York, New York 10048 and at Northwest Atrium Center, 5000 West Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call the Commission at 1-800-SEC-0330 for further information on the public reference rooms. Our Commission filings are also available to the public from the Commission's web site at: http://www.sec.gov. We have filed with the Commission a registration statement and related exhibits on Form S-3 under the Securities Act of 1933, as amended. This prospectus, which constitutes a part of the registration statement, does not include all the information contained in the registration statement and its exhibits. For further information with respect to us and our common stock, you should consult the registration statement and its exhibits. Statements contained in this prospectus concerning the provisions of any contract, agreement or other document are not necessarily complete. With respect to each contract, agreement or other document filed as an exhibit to the registration statement, we refer you to that exhibit for a more complete description of the matter involved, and each statement is deemed qualified in its entirety to that reference. The registration statement, including exhibits filed as a part of the registration statement or any amendment to the registration statement, are available for inspection and copying at the Commission's public reference facilities listed above. INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE The Commission allows us to incorporate by reference the information that we file with the Commission. This means that we can disclose important information to you by referring you to those documents. Any information we incorporate in this manner is considered part of this prospectus. Any information we file with the Commission after the date of this prospectus and until this offering is completed will automatically update and supersede the information contained in this prospectus. We incorporate by reference the following documents that we have filed with the Commission and any filings that we will make with the Commission in the future under Sections 13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934 until this offering is terminated: o Annual Report on Form 10-K for the year ended January 31, 2000 (except Items 7 and 14); o Amended Annual Report on Form 10-K/A for the year ended January 31, 2000; o Quarterly Report on Form 10-Q for the quarter ended April 30, 2000; o Current Report on Form 8-K filed with the Commission on July 5, 2000; o Current Report on Form 8-K filed with the Commission on July 28, 2000; o Quarterly Report on Form 10-Q for the quarter ended July 31, 2000; o Current Report on Form 8-K filed with the Commission on September 29, 2000; 1 o Current Report on Form 8-K filed with the Commission on November 17, 2000; and o Description of our common stock contained in our registration statement on Form 8-A filed with the Commission on March 17, 1987, as amended. We will provide without charge to each person to whom a copy of this prospectus is delivered, upon written or oral request, a copy of any or all of the documents which are incorporated by reference into this prospectus except the exhibits to such documents (unless such exhibits are specifically incorporated by reference in such documents). Requests for copies should be directed to: Comverse Technology, Inc., Attention: Vice President, Corporate and Marketing Communications, 170 Crossways Park Drive, Woodbury, NY 11797 (telephone (516) 677-7200). FORWARD-LOOKING STATEMENTS This prospectus and the documents that we incorporate by reference, may contain certain statements that we believe are, or may be considered to be, forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. We generally indicate these statements by words or phrases such as "anticipate," "estimate," "plan," "expect," "believe," "intend," "foresee" and similar words or phrases. These statements discuss, among other things, expected growth, domestic and international development and expansion strategy, and future performance. All of these forward-looking statements are subject to risks, uncertainties and assumptions, which we describe under the caption "Risk Factors" or in the documents we incorporate by reference. Consequently, actual events and results may vary significantly from those included in or contemplated or implied by our forward-looking statements. The forward-looking statements included in this prospectus, the applicable prospectus supplement or the relevant incorporated document are made only as of the date of this prospectus, the applicable prospectus supplement or the relevant incorporated document, as the case may be, and, except as required by law, we undertake no obligation to publicly update these forward-looking statements to reflect subsequent events or circumstances. 2 ABOUT COMVERSE Because this is a summary, it does not contain all the information about us that may be important to you. You should read the more detailed information and the financial statements and related notes which are incorporated by reference in this prospectus. We manufacture and market systems and software for multimedia communications and information processing applications. Our products are used in a broad range of applications by wireless and wireline telephone network operators, call centers, financial institutions, government agencies and other public and commercial organizations worldwide. We are a holding company and substantially all of our operations are conducted through our subsidiaries, including Comverse Network Systems, Inc., Comverse Infosys, Inc. and Ulticom, Inc. Our Comverse Network Systems subsidiary is the leading provider of multimedia enhanced services systems and software, which are currently used by more than 330 wireless and wireline telecommunications network operators. These products enable our customers to provide value-added enhanced services, such as call answering, wireless data and Internet-based information services, prepaid wireless services, mailbox-to-mailbox messaging, Internet-based unified messaging (voice, fax and e-mail in a single mailbox), interactive voice response, virtual phone/fax, one-touch call return, personal number service, call screening/caller introduction, voice-controlled Internet portal and other speech recognition-based services, Internet messaging, Internet call waiting and other personal communication services. Our Comverse Infosys subsidiary provides multiple channel, multimedia digital recording, logging and quality monitoring systems to call centers, financial institutions and other organizations. Comverse Infosys also provides multiple channel, multimedia digital monitoring systems to law enforcement and intelligence agencies. Our Ulticom subsidiary is a provider of network signaling software for wireless, wireline and Internet communications services. Its call control products enable communications service providers to offer intelligent network services, such as voice-activated dialing, prepaid calling, caller ID and text messaging. Ulticom has completed an initial public offering of its shares in April 2000, and its shares are listed on the NASDAQ National Market System under the symbol ULCM. We hold approximately 77% of Ulticom's outstanding shares. We were incorporated in New York in October 1984. Our principal executive offices are located at 170 Crossways Park Drive, Woodbury, New York 11797, and our telephone number is (516) 677-7200. For additional information relating to our business, operations, properties, certain acquisitions and other matters, see the documents referred to above under "Where You Can Find More Information" and the information we incorporate by reference in this prospectus described under the heading "Incorporation of Certain Documents by Reference." 3 RISK FACTORS Before purchasing any shares, you should carefully consider the following risk factors in addition to the other information contained and incorporated by reference in this prospectus. IF WE ARE NOT ABLE TO MANAGE OUR GROWTH EFFECTIVELY, OUR BUSINESS AND OPERATING RESULTS COULD SUFFER. We have grown rapidly over the past decade and we continue to experience rapid growth in our operations, both through internal expansion and acquisitions of other companies. Our future success depends in part on our continued ability to manage our growth effectively. As our operations continue to expand worldwide, management issues are likely to become more complex and challenging. We also regularly examine opportunities to acquire other companies or lines of business. Acquisitions present a number of significant financial, operational and legal risks. It can also be difficult to combine the operations of an acquired business with our operations, without suffering the loss of key personnel, customers or distributors. If we fail to manage our growth effectively or experience problems with our acquisitions, our future operations and financial results will be adversely affected. OUR BUSINESS IS VULNERABLE TO RISKS ASSOCIATED WITH THE SALE OF LARGE, COMPLEX, HIGH CAPACITY SYSTEMS. Our business has, to a significant extent, been based on contracts for large, high capacity systems, and we continue to emphasize these systems in our product development and marketing plans. Users of high-capacity systems, such as telephone companies, require systems that provide an exceptionally high level of reliability. Such systems are typically more costly to design, build and support. Contracts for large installations typically involve a lengthy and complex bidding and selection process, and our ability to obtain particular contracts is difficult to predict. In addition, the timing and scope of these opportunities and the pricing and margins associated with any eventual contract award are difficult to forecast, and may vary substantially from transaction to transaction. Our traditional dependence on large orders, and the investment required to enable us to perform such orders, without assurance of continuing order flow from the same customers and predictability of gross margins on any future orders, increase the risk associated with our business. THE MARKET FOR OUR PRODUCTS IS CHARACTERIZED BY RAPIDLY CHANGING TECHNOLOGY. OUR CONTINUED SUCCESS DEPENDS ON OUR ABILITY TO ENHANCE OUR EXISTING PRODUCTS AND TO INTRODUCE NEW PRODUCTS ON A TIMELY AND COST-EFFECTIVE BASIS. The market for our products is characterized by rapidly changing technology, frequent new product introductions and enhancements and evolving industry standards. Our continued success depends to a significant extent upon our ability to accurately anticipate the evolution of new products and technologies and to enhance our existing products. It also depends on our ability to develop and introduce innovative new products that gain market acceptance. We may not be successful in selecting, developing, manufacturing and marketing new products or enhancing our existing products on a timely or cost-effective basis. In addition, our products utilize complex hardware and software technology that performs critical functions to highly demanding standards. The greater the complexity of our products, the greater is the risk of future performance problems or delays in product introductions, which could damage our business and financial results. OUR BUSINESS CAN BE SERIOUSLY AFFECTED BY CHANGES IN THE COMPETITIVE OR REGULATORY ENVIRONMENT IN COMMUNICATIONS MARKETS WORLDWIDE. We sell a majority of our products to telephone companies and other communications service providers. The communications services industry is undergoing significant change as a result of deregulation and privatization worldwide. Our business is extremely competitive, and we expect competition to continue to intensify. Our existing competitors will continue to present substantial competition, and other companies, many with considerably greater financial, marketing and sales and other resources, may enter our markets in the future. The communications industry has experienced a continuing evolution of product offerings and alternatives for delivery of services. These trends have affected and may be expected to have a significant continuing influence on conditions in our markets. Rapid and significant change makes planning decisions more difficult and increases the risk inherent in the planning process. 4 BECAUSE A SIGNIFICANT AMOUNT OF OUR SALES ARE MADE TO GOVERNMENT ENTITIES, WE ARE VULNERABLE TO RISKS ASSOCIATED WITH GOVERNMENT BUSINESS. Many of our sales are made to customers that are owned or controlled by governments or government agencies. Government business is, in general, subject to special risks, such as: o delays in funding; o termination of contracts or subcontracts for the convenience of the government; o termination, reduction or modification of contracts or subcontracts in the event of changes in the government's policies or as a result of budgetary constraints; o obligations of performance guarantees and restrictions on the draw-down of funds subject to achievement of performance milestones; o requirements to obtain and maintain security clearances for operating subsidiaries and key personnel; and o increased or unexpected costs resulting in losses or reduced profits under fixed price contracts. The special risks associated with government contracts could have a material adverse effect on our future business and financial performance. In addition, the market for telecommunications monitoring systems sold to government customers is in a period of significant transition. Budgetary constraints, uncertainties resulting from the introduction of new technologies in the telecommunications industry and changes in the pattern of government expenditures have increased uncertainties in this industry, resulting in certain instances in the attenuation of government procurement programs beyond their originally expected performance periods and an increased incidence of delay, cancellation or reduction of planned projects. The delay and uncertainties surrounding the Communications Assistance for Law Enforcement Act have had a significant negative impact on purchasing plans of law enforcement agencies in North America engaged in monitoring activities. Our ability to obtain government orders in particular instances may also be affected by decisions of potential government customers to develop their own products or technical solutions internally, rather than through the use of outside suppliers, and by decisions of government contractors and systems integrators to bid on individual government procurement opportunities. The lack of predictability in the timing and scope of government procurements has made planning decisions more difficult and has increased the associated risks. WE HAVE SIGNIFICANT INTERNATIONAL SALES, WHICH SUBJECTS US TO RISKS INHERENT IN FOREIGN OPERATIONS. A significant portion of our sales are made to customers outside of the United States. International transactions involve particular risks, including political decisions affecting tariffs and trade conditions, rapid and unforeseen changes in economic conditions in individual countries, turbulence in foreign currency and credit markets, and increased costs resulting from lack of proximity to the customer. Our products must be designed to meet the regulatory standards of foreign markets, and any inability to obtain foreign regulatory approvals can cause us to lose sales opportunities. In addition, international sales frequently require special features and customization to satisfy local market conditions, and certain international customers may require longer payment terms than we may typically provide. Volatility in international currency exchange rates may have an impact on our operating results. We have significant contracts payable in foreign (primarily Western European) currencies. As a result of the unpredictable timing of purchase orders and payments under these contracts and other factors, it is often not practicable for us to effectively hedge the risk of significant changes in currency rates during the contract period. Since we engage in currency hedging only to a limited extent, our financial results can be affected by the impact of currency fluctuations in any particular period, as well as the cost of such hedging activities that we do perform. 5 WE HAVE A SIGNIFICANT AMOUNT OF INDEBTEDNESS OUTSTANDING. As of July 31, 2000, after giving effect to the sale of our debentures on November 22, 2000, our total consolidated long-term liabilities were approximately $805.3 million. The amount of debt we carry can affect our business in a variety of ways such as: o limiting our ability to obtain any necessary additional financing in the future on reasonable terms, or at all; o requiring the dedication of a substantial portion of our cash flow from operations to debt service payments, making it unavailable for other purposes; o limiting our flexibility in operating, or reacting to changes in, our business, placing us at a competitive disadvantage to certain of our competitors; and o making us more vulnerable to downturns in our business. OUR CASH MANAGEMENT AND INVESTMENT ACTIVITIES COULD ADVERSELY AFFECT OUR BUSINESS AND OPERATING RESULTS. We have a significant portion of our assets in a variety of financial instruments, including government obligations, commercial paper, medium-term notes, bank time deposits, money-market accounts, common and preferred stocks and convertible debt obligations. Decisions as to our financial holdings are made both for purposes of cash management and, to some extent, as strategic and portfolio investments. These activities subject us to risks inherent in the capital markets generally, and to the performance of other businesses over which we have no direct control. We engage in investment activities, including venture capital investments in high technology firms and funds, as well as strategic and capital management investment activities for our own account. We believe that our investments will enable us to participate in technology innovation opportunities in areas of interest to us without having to dedicate the capital and management resources that would be necessary for such participation through our own internal research and development efforts. Our objectives are also to initiate relationships that may result in eventual expansion of our product and marketing positions and potential acquisition opportunities, and to leverage our technological expertise and established relationships in the technology, business and financial communities to identify and participate in special opportunities. Investments in early-stage technology ventures, however, are subject to a number of risks associated with the limited operating history of such ventures and the frequent absence of liquidity of their securities. While we do not regard our portfolio and strategic investment activities as a primary element of our overall business plan, we expect to continue to allocate some of our liquid assets for these purposes and, in particular, to increase our holdings in technology companies as part of our long-term growth strategy. Since we maintain a significant amount of liquid assets relative to our overall size, our financial results in the future may, to a greater degree than in the past, be affected by the results of our capital management and investment activities and the risks associated with those activities. WE ARE A HOLDING COMPANY AND SUBSTANTIALLY ALL OF OUR OPERATIONS ARE CONDUCTED THROUGH SUBSIDIARIES. We are a holding company and substantially all of our operations are conducted through subsidiaries. We are limited by contract in the amount of dividends we can receive from one of our subsidiaries in Israel to 75% of its net income. In addition, because our Israeli subsidiaries have received certain benefits under the laws relating to approved enterprises (described in the following paragraph), payment of dividends to us may subject those subsidiaries to certain Israeli taxes to which they would otherwise not be subject. Our Israeli subsidiaries are required under Israeli law to withhold for tax purposes, at a rate of up to 25%, cash dividends paid to foreign residents. Under the United States-Israel Tax Treaty, a 12.5% Israeli dividend withholding tax would apply to dividends paid to a U.S. corporation (such as Comverse) that owns 10% or more of an Israeli company's voting stock for, in general, the current and preceding tax years of the Israeli company. However, under the treaty, dividends on income derived from an approved enterprise are subject to a 15% dividend withholding tax. THE ISRAELI GOVERNMENT PROGRAMS AND TAX BENEFITS THAT WE CURRENTLY RECEIVE REQUIRE US TO MEET SEVERAL CONDITIONS AND MAY BE TERMINATED OR REDUCED IN THE FUTURE, WHICH WOULD INCREASE OUR COSTS AND TAXES. 6 A significant portion of our research and development and manufacturing operations are located in Israel. Our historical operating results reflect substantial benefits we received from programs sponsored by the Israeli government for the support of research and development, as well as tax moratoriums and favorable tax rates associated with investments in approved projects, or approved enterprises, in Israel. To be eligible for these programs and tax benefits, we must continue to meet conditions, including making specified investments in fixed assets and financing a percentage of investments with share capital. If we fail to meet such conditions in the future, the tax benefits would be canceled and we could be required to refund the tax benefits already received. These programs and tax benefits may not be continued in the future at their current levels or at any level. The Israeli government has reduced the benefits available under some of these programs in recent years, and Israeli governmental authorities have indicated that the government may further reduce or eliminate some of these benefits in the future. In 1996, the Israeli government acted to increase, from between 2% and 3% of associated product sales to between 3% and 5% (or 6% under certain circumstances) of associated product revenues (including service and other related revenues), the annual rate of royalties to be applied to repayment of benefits under a conditional grant program administered by the Office of the Chief Scientist of the Ministry of Industry and Trade, a program in which we have regularly participated and under which we continue to receive significant benefits through reimbursement of up to 50% of qualified research and development expenditures. The repayment of amounts received under the program will be accelerated through these higher royalty rates until repayment is completed. Repayment of any amount received under programs which have been, or will be, approved by the Office of the Chief Scientist after January 1, 1999 entail repayment of the amount received (calculated in U.S. dollars), plus interest on such amount at a rate equal to the 12-month LIBOR rate in effect at the time of the approval of the program. In addition, permission from the Government of Israel is required for us to manufacture outside of Israel products resulting from research and development activities funded under these programs, or to transfer outside of Israel related technology rights. In order to obtain such permission, we may be required to increase the royalties to the applicable funding agencies and/or repay certain amounts received as reimbursement of research and development costs. The Israeli authorities have also indicated that this funding program will be further reduced significantly or eliminated in the future, particularly for larger companies such as Comverse. The termination or reduction of these programs could adversely affect our operating results. The Israeli government has also shortened the period of the tax moratorium applicable to approved enterprises from four years to two years. Although this change has not affected the tax status of our projects that were eligible for the moratorium prior to 1997, it applies to subsequent approved enterprise projects. If further changes in the law or government policies regarding those programs were to result in their termination or adverse modification, or if we were to become unable to participate in or take advantage of those programs, the cost of our operations in Israel would increase and there could be a material adverse effect on our operations and financial results. To the extent that we increase our activities outside Israel, which could result from, among other things, future acquisitions, such increased activities will not be eligible for programs sponsored by Israel. BECAUSE A SIGNIFICANT PORTION OF OUR OPERATIONS ARE LOCATED IN ISRAEL, POLITICAL, MILITARY AND ECONOMIC CONDITIONS IN THAT COUNTRY MAY ADVERSELY AFFECT OUR BUSINESS AND OPERATING RESULTS. Although our operations have not been adversely affected to date by political or military conditions in Israel, a disruption of our operations in Israel due to political, military or other conditions could have a material adverse effect on our operations and financial results. General inflation in Israel and increases in the cost of attracting and retaining qualified scientific, engineering and technical personnel in Israel, where the demand for such personnel is growing rapidly with the expansion of high technology industries, have increased our cost of operations in Israel. These increases have not been offset in all periods by proportional devaluation of the Israeli shekel relative to the U.S. dollar and, as a result, have had a negative impact on our results of operations. Continued increases in our shekel-denominated costs without corresponding devaluation could have a material adverse effect on our future operating results. 7 OUR FUTURE SUCCESS DEPENDS ON OUR EXISTING KEY PERSONNEL, THE LOSS OF WHOM COULD ADVERSELY IMPACT OUR BUSINESS AND OPERATING RESULTS. Our future success depends, to a considerable extent, on the contributions of senior management and key employees, many of whom are not subject to employment agreements and/or would be difficult to replace. Our future success also depends on our ability to attract and retain qualified employees in all areas of our business. Competition for such personnel is intense, particularly in the computer and communications industries. In order to attract and retain talented and qualified personnel, and to provide incentives for their performance, we have emphasized the award of stock options as an important element of our compensation program, including, in the case of certain personnel, options to purchase shares in certain of our subsidiaries. OUR BUSINESS AND OPERATING RESULTS MAY SUFFER FROM INCREASED EXPENDITURES IN OUR OPERATIONS. We have significantly increased expenditures in all areas of our operations during recent years, and we plan to continue to make significant investment in the growth of our operations during future periods. The competitiveness of our products and our ability to take advantage of future growth opportunities depends upon our ability to enhance the range of features and capabilities of our existing product lines, develop new generations of products and expand our marketing, sales and product support capabilities. In many instances, we will have to make large expenditures for research and development and product marketing in anticipation of future market requirements that are uncertain and may undergo significant change prior to product introduction. The success of our efforts depends, to a considerable extent, on our ability to anticipate future market requirements and successfully implement corresponding research and development and marketing programs on a timely basis. THIRD PARTIES MAY INFRINGE UPON OUR PROPRIETARY TECHNOLOGY AND WE MAY INFRINGE ON THE INTELLECTUAL PROPERTY RIGHTS OF OTHERS. Although we use what we believe to be customary and appropriate measures to protect our technology, these measures may not prove to be successful, and our competitors may be able to develop similar technology independently. We currently hold a limited number of United States and foreign patents and we periodically file additional applications for patents on various features of our products. We cannot assure you that claims allowed with respect to any current or future patents will prove to be sufficiently broad to protect our technology. In addition, we cannot assure you that our patents will not be challenged, invalidated or circumvented, or that the rights granted under the patents will provide significant benefits. We and our customers from time to time receive communications from third parties, including some of our competitors, alleging infringement by our products of certain of such parties' patent rights. Although these types of communications are common in the computer and telecommunications industries, and we have in the past been able to obtain any necessary licenses on commercially reasonable terms, we cannot assure you that we would prevail in any litigation to enjoin our sale of any products on the basis of such alleged infringement, or that we would be able to license any valid patents on reasonable terms. THE TRADING PRICE OF OUR COMMON STOCK MAY BE VOLATILE. The trading price of our common stock may be affected by the risk factors described in this prospectus as well as prevailing economic and financial trends and conditions in the public securities markets. Stock prices of companies in technology businesses tend to exhibit a high degree of volatility. Shortfalls in revenues or earnings from the levels anticipated by the public markets could have an immediate and significant adverse effect on the trading price of our common stock in any given period. Such shortfalls may result from events that are beyond our immediate control, can be unpredictable and, since a significant proportion of our sales during each fiscal quarter often occurs in the latter stages of the quarter, may not be discernible until the end of a financial reporting period. These factors can contribute to the volatility of the trading price of our common stock regardless of our long-term prospects. The trading price of our common stock may also be affected by developments, including reported financial results and fluctuations in trading prices of the shares of other publicly-held companies in the computer and communications industries generally, and in our industry in particular, which may not have any direct relationship with our business or prospects. 8 USE OF PROCEEDS The shares of common stock are being offered solely for the accounts of the selling shareholders identified in this prospectus or any supplement or amendment hereto. We will not receive any proceeds from the sale of their shares. 9 SELLING SHAREHOLDERS The selling shareholders obtained shares of our common stock upon completion of our acquisition on August 8, 2000 of Gaya Software Industries Ltd., a company in Israel specializing in software-based intelligent Internet protocol gateways and voice-over-Internet protocol technology. In connection with that transaction, we agreed to register for sale the shares of common stock issued by us to the former shareholders of Gaya, including the shares being registered in this prospectus which are currently held in escrow pursuant to the terms of that transaction. We have also agreed to keep the registration statement effective (subject to our right to require the selling shareholders to suspend their use of this prospectus under certain circumstances), for as long as reasonably specified in the plan of distribution contained in this prospectus. We have also agreed to pay certain related expenses and to indemnify each selling shareholder against certain liabilities, including liabilities arising under the federal securities laws. Messrs. Yotam Raz, Yoram Regev and Ofer Cornfeld served as Chief Executive Officer, Vice President of Research and Development and Chief Technology Officer, respectively, of GAYA. All three individuals also served as directors of GAYA. After our acquisition of GAYA, Messrs. Raz, Regev and Cornfeld continue to serve in their respective positions and continue to serve as directors of GAYA. The following table sets forth information with respect to the selling shareholders and the number of shares of common stock beneficially owned by each selling shareholder. This information has been obtained from the selling shareholders. Because the selling shareholders may sell all or some of the shares of common stock covered under this prospectus, no estimate can be given as to the number of shares that will be held by the selling shareholders upon termination of any such sales. For purposes of compiling this table, we have assumed that the selling shareholders will sell all of the shares offered hereby. In addition, the selling shareholders identified below may have sold, transferred or otherwise disposed of all or a portion of their shares since the date on which they provided the information regarding their shares in transactions exempt from the registration requirements of the Securities Act. 10
COMMON STOCK COMMON STOCK OWNED OWNED AFTER THE SELLING SHAREHOLDER BEFORE THE OFFERING TOTAL SHARES TO BE SOLD OFFERING ------------------- ------------------- ----------------------- -------- Yotan Raz 9,459 9,459 0 Yoram Regev 9,458 9,458 0 Ofer Cornfeld 9,459 9,459 0
Generally, only the selling shareholders identified in the foregoing table who beneficially own the shares of common stock set forth opposite their respective names may sell such shares pursuant to the registration statement of which this prospectus forms a part. We may from time to time include additional selling shareholders. 11 PLAN OF DISTRIBUTION The selling shareholders may sell their shares covered by this prospectus from time to time at market prices prevailing at the time of sale, at prices related to such prevailing market prices or at negotiated prices. The selling shareholders may offer their shares for sale in one or more of the following transactions: o on the Nasdaq National Market, o through the facilities of any national securities exchange or U.S. automated inter-dealer quotation system of a registered national securities association on which our shares are then listed, admitted to unlisted trading privileges or included for quotation, o in privately negotiated transactions, or o in a combination of such methods of sale. The selling shareholders may sell their shares directly, or indirectly through underwriters, broker-dealers or agents acting on their behalf. In connection with such sales, the broker-dealers or agents may receive compensation in the form of commissions, concessions, allowances or discounts from the selling shareholders and/or the purchasers of the shares for whom they may act as agent or to whom they sell the shares as principal or both (which commissions, concessions, allowances or discounts might be in excess of customary amounts thereof). Sales will be made only through broker-dealers registered as such in a subject jurisdiction or in transactions exempt from such registration. We have not been advised of any definitive selling arrangement at the date of this prospectus between any selling shareholder and any broker-dealer or agent. We will not receive any of the proceeds from the sale of the shares by the selling shareholders. In connection with the distribution of their shares, certain of the selling shareholders may enter into hedging transactions with broker-dealers. In connection with such transactions, broker-dealers may engage in short sales their shares in the course of hedging the positions they assume with the selling shareholders. The selling shareholders may also sell their shares short and redeliver such shares to close out the short positions. The selling shareholders may also enter into option or other transactions with broker-dealers which require the delivery of their shares to the broker-dealer. The selling shareholders may also loan or pledge the shares to a broker-dealer and the broker-dealer may sell the shares so loaned, or upon a default, the broker-dealer may effect sales of the pledged shares. The selling shareholders and any dealer acting in connection with the offering or any broker executing a sell order on behalf of a selling shareholder may be deemed to be underwriters within the meaning of the Securities Act. In such event any profit on the sale of shares by a selling shareholder and any commissions or discounts received by any such broker or dealer may be deemed to be underwriting compensation under the Securities Act. In addition, any such broker or dealer may be required to deliver a copy of this prospectus to any person who purchases any of the shares from or through such broker or dealer. We have agreed to file the reports required to be filed by us under the Securities Act and the Exchange Act in a timely manner and to take such further action as any selling shareholder may reasonably request to enable such holder to sell his or her securities without registration, including making publicly available the information necessary to permit sales of the securities pursuant to Rules 144 and 144A under the Securities Act. We have agreed to pay all fees and expenses incurred in connection with the registration of our shares of common stock, except fees and expenses of the selling shareholders' counsel. We and the selling shareholders have agreed to indemnify each other against certain civil liabilities, including certain liabilities arising under the Securities Act and Exchange Act. 12 LEGAL MATTERS Certain legal matters with respect to the validity of the securities offered hereby will be passed upon for the Company by William F. Sorin, attorney-at-law, c/o Comverse, 170 Crossways Park Drive, Woodbury, New York 11797. Mr. Sorin is an officer and director of the Company and the beneficial owner of 28,126 shares of common stock issuable upon the exercise of options granted by us. EXPERTS The consolidated financial statements as of January 31, 1999 and 2000 and for the years ended December 31, 1997 and January 31, 1999 and 2000, incorporated by reference in this prospectus have been audited by Deloitte & Touche LLP, independent auditors, as stated in their report, which is incorporated herein by reference, and have been so incorporated in reliance upon the report of such firm given upon their authority as experts in accounting and auditing. 13 ------------------------------------------------------ ------------------------------------------------------ YOU SHOULD RELY ONLY ON THE INFORMATION PROVIDED OR INCORPORATED BY REFERENCE IN THIS PROSPECTUS OR ANY SUPPLEMENT. WE HAVE NOT AUTHORIZED ANYONE ELSE TO PROVIDE YOU WITH ADDITIONAL OR DIFFERENT INFORMATION. THE COMMON STOCK IS NOT BEING OFFERED IN ANY STATE WHERE THE OFFER IS NOT PERMITTED. YOU SHOULD NOT ASSUME THAT THE INFORMATION IN THIS PROSPECTUS OR ANY SUPPLEMENT IS ACCURATE AS OF ANY DATE OTHER THAN THE DATE ON THE FRONT OF SUCH DOCUMENT. ---------------- 28,376 SHARES COMVERSE TECHNOLOGY, INC. COMMON STOCK ------------- PROSPECTUS December 5, 2000 ------------- ------------------------------------------------------ ------------------------------------------------------ 14 -----END PRIVACY-ENHANCED MESSAGE-----