On May 16, 2014, we issued an updated research report on
). The company has won important managed service contracts in the
economically volatile European region. We believe that the
long-term fundamentals of the company are intriguing due to the
transition of the telecom industry to converged IP solutions.
Amdocs has delivered positive earnings surprises in the last four
quarters, with an average surprise of negative 8.68%. It also
reported better financial results for the second quarter of fiscal
2014 wherein both the top and the bottom line easily surpassed the
Zacks Consensus Estimate.
Amdocs' business opportunity in the U.S. is more visible after
stabilization of businesses with
) and renewal of long-term contracts with several leading telecom
and cable TV operators like
). Furthermore, it has signed a 5-year global managed services
Vodafone Group plc
). The new deal will help the carrier optimize its customer care
and billing activities.
Recently, Amdox acquired privately-held Actix, a leading provider
of software for mobile network optimization. Also, Amdocs took over
Calcite - a leading provider of network management and self
optimizing network solutions. These buyouts are expected to enhance
Amdocs' CES portfolio across telecom networks and information
technologies. Moreover, a strong cash position coupled with
increased free cash flow will help Amdocs pursue future
On the flipside, Amdocs is experiencing high customer
concentration. Three major clients, namely, AT&T,
) together accounted for over 50% of the company's total revenue.
Loss of any of these customers will result in significant erosion
of the top line.
Moreover, consolidation trend in the U.S. telecom industry may
significantly affect the operations of the company going forward.
Sprint's merger with Japanese telecom operator Softbank and
acquisition of Clearwire may also affect Amdocs' top line. While
) has acquired MetroPCS, AT&T has decided to acquire Leap
Wireless. All these collaborations will probably have a material
effect on Amdocs.
Amdocs currently has a Zacks Rank #3 (Hold).
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