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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

FORM 10-Q


[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2003

or

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934


COMMISSION FILE NUMBER: 0-15502


COMVERSE TECHNOLOGY, INC.
(Exact name of registrant as specified in its charter)

NEW YORK 13-3238402
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)


170 CROSSWAYS PARK DRIVE, WOODBURY, NY 11797
(Address of principal executive offices) (Zip Code)


(516) 677-7200
(Registrant's telephone number, including area code)


NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report)


Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No


Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
[X] Yes [ ] No


APPLICABLE ONLY TO CORPORATE ISSUERS:

The number of shares of Common Stock, par value $0.10 per share,
outstanding as of June 6, 2003 was 188,291,056


Page 1 of 29 Total Pages

TABLE OF CONTENTS



Page

PART I
FINANCIAL INFORMATION

ITEM 1. Financial Statements.

1. Condensed Consolidated Balance Sheets as of
January 31, 2003 and April 30, 2003 3

2. Condensed Consolidated Statements of Operations
for the Three Month Periods Ended April
30, 2002 and April 30, 2003 4

3. Condensed Consolidated Statements of Cash Flows
for the Three Month Periods Ended April
30, 2002 and April 30, 2003 5

4. Notes to Condensed Consolidated Financial
Statements 6

ITEM 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 13

ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk. 25

ITEM 4. Controls and Procedures. 25


PART II
OTHER INFORMATION

ITEM 1. Legal Proceedings. 26

ITEM 6. Exhibits and Reports on Form 8-K. 26

SIGNATURES 27

CERTIFICATIONS 28




Page 2 of 29 Total Pages

PART I
Financial Information

ITEM 1. Financial Statements.

COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)



JANUARY 31, APRIL 30,
2003* 2003

ASSETS (Unaudited)
- ------

CURRENT ASSETS:
Cash and cash equivalents $1,402,783 $1,418,238
Bank time deposits and short-term investments 406,089 335,504
Accounts receivable, net 212,953 184,027
Inventories 40,015 43,315
Prepaid expenses and other current assets 65,018 53,285
----------- -----------
TOTAL CURRENT ASSETS 2,126,858 2,034,369
PROPERTY AND EQUIPMENT, net 146,380 140,601
OTHER ASSETS 130,421 127,253
----------- -----------
TOTAL ASSETS $2,403,659 $2,302,223
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------

CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 260,810 $ 249,683
Advance payments from customers 53,496 52,614
Other current liabilities 46,045 3,023
----------- -----------
TOTAL CURRENT LIABILITIES 360,351 305,320
CONVERTIBLE DEBENTURES 390,838 346,288
OTHER LIABILITIES 19,230 17,807
----------- -----------
TOTAL LIABILITIES 770,419 669,415
----------- -----------

MINORITY INTEREST 83,548 85,742
----------- -----------

STOCKHOLDERS' EQUITY:
Common stock, $0.10 par value -
authorized, 600,000,000 shares;
issued and outstanding, 187,754,407 and 188,192,862 shares 18,775 18,819
Additional paid-in capital 1,078,720 1,082,872
Retained earnings 445,285 439,466
Accumulated other comprehensive income 6,912 5,909
----------- -----------
TOTAL STOCKHOLDERS' EQUITY 1,549,692 1,547,066
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $2,403,659 $2,302,223
=========== ===========


*The Condensed Consolidated Balance Sheet as of January 31, 2003 has been
summarized from the Company's audited
Consolidated Balance Sheet as of that date.

The accompanying notes are an integral part of these financial statements.


Page 3 of 29 Total Pages

COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)



THREE MONTHS ENDED
APRIL 30, APRIL 30,
2002 2003

Sales $211,194 $180,552
Cost of sales 91,777 80,373
---------- ----------
Gross margin 119,417 100,179

Operating expenses:
Research and development, net 62,923 54,488
Selling, general and administrative 73,513 62,072
---------- ----------

Loss from operations (17,019) (16,381)

Interest and other income (expense), net (5,244) 12,542
---------- ----------

Loss before income tax provision (22,263) (3,839)
Income tax provision 1,313 1,980
---------- ----------

Net loss $ (23,576) $ (5,819)
========== ==========

Loss per share:
Basic $ (0.13) $ (0.03)
======= =======
Diluted $ (0.13) $ (0.03)
======= =======



The accompanying notes are an integral part of these financial statements.




Page 4 of 29 Total Pages


COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)


THREE MONTHS ENDED
APRIL 30, APRIL 30,
2002 2003

Cash flows from operating activities:
Net cash from operations after adjustment
for non-cash items $ (6,636) $ 14,557
Changes in assets and liabilities:
Accounts receivable 26,448 28,926
Inventories (1,319) (3,300)
Prepaid expenses and other current assets 10,206 9,071
Accounts payable and accrued expenses (22,401) (11,127)
Other, net (15,517) (833)
----------- -----------
Net cash provided by (used in) operating activities (9,219) 37,294
----------- -----------

Cash flows from investing activities:
Maturities and sales (purchases) of bank time deposits
and investments, net (44,647) 69,979
Purchases of property and equipment (6,545) (8,487)
Capitalization of software development costs (3,660) (2,305)
Net assets acquired (9,706) -
----------- -----------
Net cash provided by (used in) investing activities (64,558) 59,187
----------- -----------

Cash flows from financing activities:
Repurchase of debentures - (41,261)
Net repayments of bank loans and other debt (533) (45,084)
Net proceeds from issuance of common stock 6,771 5,319
----------- -----------
Net cash provided by (used in) financing activities 6,238 (81,026)
----------- -----------

Net increase (decrease) in cash and cash equivalents (67,539) 15,455
Cash and cash equivalents, beginning of period 1,361,862 1,402,783
----------- -----------
Cash and cash equivalents, end of period $ 1,294,323 $ 1,418,238
=========== ===========


The accompanying notes are an integral part of these financial statements.



Page 5 of 29 Total Pages

COMVERSE TECHNOLOGY, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)


BASIS OF PRESENTATION. Comverse Technology, Inc. ("CTI" and, together
with its subsidiaries, the "Company") is engaged in the design, development,
manufacture, marketing and support of computer and telecommunications systems
and software for multimedia communications and information processing
applications.

The accompanying financial information should be read in conjunction
with the financial statements, including the notes thereto, for the annual
period ended January 31, 2003. The financial information included herein is
unaudited; however, such information reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary for a fair statement of results for the interim periods. The results
of operations for the three month period ended April 30, 2003 are not
necessarily indicative of the results to be expected for the full year.

RECLASSIFICATIONS. Certain prior year amounts have been reclassified
to conform to the manner of presentation in the current year.

STOCK-BASED COMPENSATION. The Company accounts for stock options under
the recognition and measurement principles of Accounting Principles Board
("APB") Opinion No. 25, "Accounting for Stock Issued to Employees," and related
Interpretations. Accordingly, no stock-based employee compensation cost is
reflected in net income for any periods, as all options granted have an exercise
price at least equal to the market value of the underlying common stock on the
date of grant.

The Company estimated the fair value of employee stock options
utilizing the Black-Scholes option valuation model, using appropriate
assumptions, as required under accounting principles generally accepted in the
United States of America. The Black-Scholes model was developed for use in
estimating the fair value of traded options and does not consider the non-traded
nature of employee stock options, vesting and trading restrictions, lack of
transferability or the ability of employees to forfeit the options prior to
expiry. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of the Company's employee stock options.

The following table illustrates the effect on net loss and loss per
share if the Company had applied the fair value recognition provisions of
Statement of Financial Accounting Standards ("SFAS") No. 123 to stock-based
employee compensation for all periods:


Page 6 of 29 Total Pages



THREE MONTHS ENDED APRIL 30,
-----------------------------------------
2002 2003
---- ----

Net loss, as reported $ (23,576) $ (5,819)

Deduct: Total stock-based employee compensation expense determined under fair
value based method for all awards, net of related tax effects (39,057) (37,136)
---------------- ------------------

Pro forma net loss $ (62,633) $ (42,955)
================ ==================
Loss per share:

Basic - as reported $ (0.13) $ (0.03)
Basic - pro forma $ (0.34) $ (0.23)

Diluted - as reported $ (0.13) $ (0.03)
Diluted - pro forma $ (0.34) $ (0.23)



INVENTORIES. The composition of inventories at January 31, 2003 and
April 30, 2003 is as follows:

JANUARY 31, APRIL 30,
2003 2003
(In thousands)

Raw materials $17,111 $19,976
Work in process 12,430 15,399
Finished goods 10,474 7,940
---------- ----------
$40,015 $43,315
========== ==========

RESEARCH AND DEVELOPMENT EXPENSES. A significant portion of the
Company's research and development operations are located in Israel where the
Company derives benefits from participation in programs sponsored by the
Government of Israel for the support of research and development activities
conducted in that country. Certain of the Company's research and development
activities include projects partially funded by the Office of the Chief
Scientist of the Ministry of Industry and Trade of the State of Israel (the
"OCS") under which the funding organization reimburses a portion of the
Company's research and development expenditures under approved project budgets.
One of the Company's subsidiaries accrues royalties to the OCS for the sale of
products incorporating technology developed in these projects. Another
subsidiary of the Company is not required to pay royalties on such grants. Under
the terms of the applicable funding agreements, products resulting from projects
funded by the OCS may not be manufactured outside of Israel without government


Page 7 of 29 Total Pages

approval. The amounts reimbursed by the OCS for the three month periods ended
April 30, 2002 and 2003 were $1,204,000 and $1,208,000, respectively.

EARNINGS (LOSS) PER SHARE. The computation of basic earnings (loss)
per share is based on the weighted average number of outstanding common shares.
Diluted earnings per share further assumes the issuance of common shares for all
dilutive potential common shares outstanding. The calculation of loss per share
for the three month periods ended April 30, 2002 and 2003 is as follows:



THREE MONTHS ENDED THREE MONTHS ENDED
APRIL 30, 2002 APRIL 30, 2003
-------------------------------------------- -------------------------------------------
Net Per Share Net Per Share
Loss Shares Amount Loss Shares Amount
(In thousands, except per share data)



BASIC AND DILUTED EPS
Net loss $(23,576) 186,569 $(0.13) $(5,819) 188,094 $(0.03)
======== ======= ====== ======= ======= ======


The diluted loss per share computation for the three month periods
ended April 30, 2002 and 2003 excludes incremental shares of approximately
1,996,000 and 1,524,000, respectively, related to employee stock options. These
shares are excluded due to their antidilutive effect as a result of the
Company's loss during these periods. In addition, the Company's 1.5% Convertible
Debentures were not included in the computation of diluted earnings per share
for all periods because the effect of including them would be antidilutive.

COMPREHENSIVE INCOME (LOSS). Total comprehensive loss was $27,474,000
and $6,822,000 for the three month periods ended April 30, 2002 and 2003,
respectively. The elements of comprehensive income (loss) include net income
(loss), unrealized gains/losses on available for sale securities and foreign
currency translation adjustments.

CONVERTIBLE DEBENTURES. In November and December 2000, the Company
issued $600,000,000 aggregate principal amount of its 1.50% Convertible Senior
Debentures due December 2005 (the "Debentures"). The Debentures are unsecured
senior obligations of the Company ranking equally with all of the Company's
existing and future unsecured senior indebtedness and are senior in right of
payment to any of the Company's existing and future subordinated indebtedness.
The Debentures are convertible, at the option of the holders, into shares of the
Company's common stock at a conversion price of $116.325 per share, subject to
adjustment in certain events; and are subject to redemption at any time on or
after December 1, 2003, in whole or in part, at the option of the Company, at
redemption prices (expressed as percentages of the principal amount) of 100.375%
if redeemed during the twelve-month period beginning December 1, 2003, and 100%
of the principal amount if redeemed thereafter. The Debenture holders may
require the Company to repurchase the Debentures at par in the event that the
common stock ceases to be publicly traded and, in certain instances, upon a
change in control of the Company. Upon the occurrence of a change in control,
instead of paying the repurchase price in cash, the Company may pay the
repurchase price in common stock. During the year ended January 31, 2003, the


Page 8 of 29 Total Pages

Company acquired, in open market purchases, $209,162,000 of face amount of the
Debentures, resulting in a pre-tax gain, net of debt issuance costs, of
approximately $39,374,000.

During the three month period ended April 30, 2003, the Company
acquired, in open market purchases, an additional $44,550,000 of face amount of
the Debentures, resulting in a pre-tax gain, net of debt issuance costs, of
approximately $2,809,000 included in `Interest and other income (expense), net'
in the condensed consolidated statements of operations.

BANK LOAN. In January 2002, Verint Systems Inc. ("Verint"), a
majority-owned subsidiary of CTI, took a bank loan in the amount of $42,000,000.
This loan, which matured in February 2003, bore interest at LIBOR plus 0.55% and
was guaranteed by CTI. During February 2003, Verint repaid the bank loan.

WORKFORCE REDUCTION, RESTRUCTURING AND IMPAIRMENT CHARGES. During the
years ended January 31, 2002 and 2003, the Company took steps to better align
its cost structure with the business environment and to improve the efficiency
of its operations via reductions in workforce, restructuring of operations and
the write-off of impaired assets. In connection with these actions, the Company
took charges to operations primarily pertaining to severance and other related
costs, the elimination of excess facilities and related leasehold improvements
and the write-off of certain property and equipment.

As of April 30, 2003 the Company had an accrual of approximately $43,106,000
relating to workforce reduction and restructuring. A roll-forward of the
workforce reduction and restructuring accrual from January 31, 2003 is as
follows:



WORKFORCE
ACCRUAL REDUCTION, ACCRUAL
BALANCE AT RESTRUCTURING BALANCE AT
JANUARY 31, & IMPAIRMENT CASH NON-CASH APRIL 30,
2003 CHARGES, NET PAYMENTS CHARGES 2003
---- ------------ -------- ------- ----
(IN THOUSANDS)

Severance and related $ 9,367 $ 314 $ 5,456 $ - $ 4,225
Facilities and related 40,454 (560) 1,013 - 38,881
Property and equipment - 246 - 246 -
--------- --------- --------- --------- ---------
Total $ 49,821 $ - $ 6,469 $ 246 $ 43,106
========= ========= ========= ========= =========



Severance and related costs consist primarily of severance payments
to terminated employees, fringe related costs associated with severance
payments, other termination costs and legal and consulting costs. The balance of
these severance and related costs is expected to be paid by January 2004.

Facilities and related costs consist primarily of contractually
obligated lease liabilities and operating expenses related to facilities to be
vacated primarily in the United States and Israel as a result of the
restructuring. The balance of these facilities and related costs is expected to
be paid at various dates through January 2011.


Page 9 of 29 Total Pages

Property and equipment costs consist primarily of the write-down of
various assets to their current estimable fair value.

BUSINESS SEGMENT INFORMATION. The Company's reporting segments are as
follows:

Enhanced Services Solutions Products ("ESS"). Enable
telecommunications service providers to offer a variety of revenue and traffic
generating services accessible to large numbers of simultaneous users. These
services include a broad range of messaging, information distribution and
personal communications services, such as call answering with one-touch call
return, voicemail, unified messaging (voice, fax, text, multimedia content and
email in a single mailbox, media conversion such as email to voice and visual
mailbox presentation), value-added services for roamers, prepaid wireless
calling services, wireless data and Internet-based services such as short
messaging services, wireless information and entertainment services, multimedia
messaging services, wireless instant messaging, interactive voice response, and
voice portal services, which are part of a voice-controlled portfolio of
services such as voice dialing, voice-controlled messaging, and other
applications.

Service Enabling Signaling Software Products. Interconnect the
complex circuit switching, database and messaging systems and manage vital
number, routing and billing information that form the backbone of today's public
telecommunications networks. These products also are embedded in a range of
packet softswitching products to interoperate or converge voice and data
networks and facilitate services such as voice over the Internet and Internet
offload. This segment represents the Company's Ulticom, Inc. subsidiary.

Security and Business Intelligence Recording Products. Provides
analytic solutions for communications interception, digital video security and
surveillance, and enterprise business intelligence. The software generates
actionable intelligence through the collection, retention and analysis of voice,
fax, video, email, Internet and data transmissions from multiple types of
communications networks. This segment represents the Company's Verint
subsidiary.

All Other. Includes other miscellaneous operations.













Page 10 of 29 Total Pages

The table below presents information about sales, operating income
(loss) and segment assets as of and for the three month periods ended April 30,
2002 and 2003:



Service Security and
Enhanced Enabling Business
Services Signaling Intelligence
Solutions Software Recording All Reconciling Consolidated
Products Products Products Other Items Totals
-------- -------- -------- ----- ----- ------
(In thousands)

THREE MONTHS ENDED
APRIL 30, 2002:

Sales $166,538 $7,097 $36,317 $2,293 $(1,051) $211,194
Operating income
(loss) $(14,819) $(2,903) $2,075 $(265) $(1,107) $(17,019)

THREE MONTHS ENDED
APRIL 30, 2003:

Sales $125,876 $9,129 $44,415 $2,244 $(1,112) $180,552
Operating income
(loss) $(18,312) $377 $3,499 $(252) $(1,693) $(16,381)

TOTAL ASSETS:

April 30, 2002 $1,134,707 $237,047 $119,729 $46,023 $1,133,603 $2,671,109
April 30, 2003 $959,043 $237,749 $173,698 $32,036 $899,697 $2,302,223



Reconciling items consist of the following:

Sales - elimination of intersegment revenues.
Operating Income (Loss) - elimination of intersegment operating income
and corporate operations.
Total Assets - elimination of intersegment receivables and unallocated
corporate assets.

EFFECT OF NEW ACCOUNTING PRONOUNCEMENTS. In August 2001, the Financial
Accounting Standards Board ("FASB") issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." SFAS No. 143 establishes accounting standards for
recognition and measurement of a liability for an asset retirement obligation
and the associated asset retirement cost. SFAS No. 143 applies to legal
obligations associated with the retirement of a tangible long-lived asset that
result from the acquisition, construction, development and/or normal operation
of a long-lived asset. This Statement is effective for fiscal years beginning
after June 15, 2002; however, early adoption is encouraged. The adoption of SFAS
No. 143 did not have a material effect on the Company's condensed consolidated
financial statements.


In April 2003, the FASB issued SFAS No. 149, "Amendment of Statement
133 on Derivative Instruments and Hedging Activities." SFAS No. 149 amends and
clarifies accounting for derivative instruments, including certain derivative
instruments embedded in other contracts, and for hedging activities under SFAS


Page 11 of 29 Total Pages

No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS
No. 149 is generally effective for derivative instruments, including derivative
instruments embedded in certain contracts, entered into or modified after June
30, 2003 and for hedging relationships designated after June 30, 2003. The
adoption of SFAS No. 149 is not expected to have a material effect on the
Company's condensed consolidated financial statements.

In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain
Financial Instruments with Characteristics of both Liabilities and Equity." SFAS
No. 150 establishes standards for how to classify and measure certain financial
instruments with characteristics of both liabilities and equity. SFAS No. 150 is
effective for financial instruments entered into or modified after May 31, 2003.
The adoption of SFAS No. 150 is not expected to have a material effect on the
Company's condensed consolidated financial statements.

SUBSEQUENT EVENTS. In May 2003, the Company issued $420,000,000
aggregate principal amount of its zero yield puttable securities ("ZYPS") due
2023. The ZYPS are convertible, contingent upon the occurrence of certain
events, into shares of the Company's common stock at a conversion price of
$17.97 per share. The ability of the holders to convert the ZYPS into common
stock is subject to certain conditions including, among others, the closing
price of the common stock exceeding 120% of the conversion price over certain
periods and other specified events. The Company has the right to redeem the ZYPS
for cash at any time on or after May 15, 2008, at their principal amount. The
holders have a series of put options, pursuant to which they may require the
Company to repurchase all or a portion of the ZYPS on each of May 15 of 2008,
2013, and 2018 and upon the occurrence of certain events.

From May 1 through June 10, 2003, the Company acquired, in open market
purchases, $165,148,000 of face amount of the Debentures, resulting in a pre-tax
gain, net of debt issuance costs, of approximately $5,600,000.

In May 2003, Verint acquired privately-held SmartSight Networks Inc.
("SmartSight"), a developer of IP-based video edge devices and software for
wireless video transmission, for approximately $7.0 million in cash, subject to
certain adjustments, and 149,731 shares of Verint common stock. Verint further
entered into a registration rights agreement with certain former shareholders of
SmartSight whereby Verint agreed to register under the Securities Act of 1933
those shares of Verint common stock issued to those former shareholders in
connection with the acquisition. SmartSight's solutions enable the efficient
transmission and management of video from remote locations over IP-based
wireless and wireline networks.

On May 19, 2003, Verint filed a Registration Statement on Form S-3,
as amended on June 3, 2003 and on June 12, 2003, relating to a public offering
by Verint and certain stockholders named in the Registration Statement of up to
5,750,000 shares of Verint's common stock, including underwriter's
over-allotment. CTI is not a selling stockholder. Should this offering be
successfully completed, the Company's ownership interest in Verint would be
reduced to approximately 64.5% (or approximately 62.9% if the over-allotment is
exercised) from approximately 78.1% at April 30, 2003.


Page 12 of 29 Total Pages

ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.

RESULTS OF OPERATIONS

INTRODUCTION

As explained in greater detail in "Certain Trends and Uncertainties",
the Company's two business units serving telecommunications markets are
operating within an industry experiencing a deep capital spending contraction.
Consequently, with a substantial majority of sales for the three months ended
April 30, 2003 generated from activities serving the telecommunications
industry, the Company experienced a year over year sales decline of
approximately 15%, resulting in an operating loss for the period.

THREE MONTH PERIOD ENDED APRIL 30, 2003
COMPARED TO THREE MONTH PERIOD ENDED APRIL 30, 2002

Sales. Sales for the three month period ended April 30, 2003
decreased by approximately $30.6 million, or 15%, compared to the three month
period ended April 30, 2002. This decrease is primarily attributable to a
decrease in sales of ESS products of approximately $40.6 million, with such
decrease being attributable to all major geographic regions. In addition, sales
of security and business intelligence recording products increased by
approximately $8.1 million, primarily as a result of increased digital security
and surveillance sales, and sales of service enabling signaling software
products increased by approximately $2.0 million. On a consolidated basis, sales
to customers in North America represented approximately 44% and 45% of total
sales for the three month periods ended April 30, 2003 and 2002, respectively.

Cost of Sales. Cost of sales for the three month period ended April
30, 2003 decreased by approximately $11.4 million, or 12%, compared to the three
month period ended April 30, 2002. The decrease in cost of sales is primarily
attributable to decreased personnel-related costs of approximately $7.2 million,
decreased materials and overhead costs of approximately $5.1 million and
decreased travel and entertainment costs of approximately $1.7 million, offset
by a net increase in various other costs of approximately $2.6 million. The
aforementioned decreases are primarily the result of cost reduction efforts
combined with the decrease in sales. Gross margins for the three month period
ended April 30, 2003 decreased to approximately 55.5% from approximately 56.5%
in the corresponding 2002 period.

Research and Development, Net. Net research and development expenses
for the three month period ended April 30, 2003 decreased by approximately $8.4
million, or 13%, compared to the three month period ended April 30, 2002. The
decrease in net research and development expenses is primarily attributable to
decreased personnel-related costs of approximately $8.8 million, which is
primarily the result of cost reduction efforts and a reduction of research and
development projects.

Selling, General and Administrative. Selling, general and
administrative expenses for the three month period ended April 30, 2003
decreased by approximately $11.4 million, or 16%, compared to the three month
period ended April 30, 2002, and as a percentage of sales decreased to
approximately 34% from approximately 35% in the corresponding 2002 period. The


Page 13 of 29 Total Pages

decrease in the dollar amount of selling, general and administrative expenses is
primarily due to lower bad debt expense of approximately $11.1 million.

Interest and Other Income (Expense), Net. Interest and other income
(expense), net, for the three month period ended April 30, 2003 increased by
approximately $17.8 million compared to the three month period ended April 30,
2002. The principal reasons for the increase are (i) a decrease in net losses
from the sale and write-down of investments of approximately $14.3 million; (ii)
increase in foreign currency gains of approximately $3.3 million due primarily
to the strengthening of the euro; (iii) a gain of approximately $2.8 million
recorded as a result of the Company's repurchase of approximately $44.6 million
face amount of its Debentures during the three months ended April 30, 2003; (iv)
decreased interest expense of approximately $1.1 million due to the Company's
repurchase of approximately $209.2 million and $44.6 million face amount of its
Debentures during the year ended January 31, 2003 and the three months ended
April 30, 2003, respectively; and (v) change in the equity of affiliates of
approximately $0.5 million. Such items were offset by (i) decreased interest and
dividend income of approximately $3.3 million due primarily to the decline in
interest rates; (ii) an increase of approximately $0.7 million in the minority
interest; and (iii) other changes of approximately $0.1 million, net.

Income Tax Provision. Provision for income taxes for the three month
period ended April 30, 2003 increased by approximately $0.7 million, or 51%,
compared to the three month period ended April 30, 2002, due primarily to shifts
in the underlying mix of pre-tax income by tax jurisdiction. The Company's
overall rate of tax is reduced significantly by the existence of net operating
loss carryforwards for Federal income tax purposes in the United States, as well
as the tax benefits associated with qualified activities of certain of its
Israeli subsidiaries, which are entitled to favorable income tax rates under a
program of the Israeli Government for "Approved Enterprise" investments in that
country.

Net Loss. Net loss for the three month period ended April 30, 2003
decreased by approximately $17.8 million compared to the three month period
ended April 30, 2002, while as a percentage of sales was approximately (3.2)%
compared to approximately (11.2)% in the corresponding 2002 period. The decrease
in the dollar amount of the net loss resulted primarily from the factors
described above.

LIQUIDITY AND CAPITAL RESOURCES

The Company's working capital at April 30, 2003 and January 31, 2003
was approximately $1,729.0 million and $1,766.5 million, respectively. At April
30, 2003 and January 31, 2003, the Company had total cash and cash equivalents,
bank time deposits and short-term investments of approximately $1,753.7 million
and $1,808.9 million, respectively.

Operations for the three month periods ended April 30, 2003 and 2002,
after adjustment for non-cash items, provided (used) cash of approximately $14.6
million and $(6.6) million, respectively. During such periods, other changes in
operating assets and liabilities provided (used) cash of approximately $22.7
million and $(2.6) million, respectively. This resulted in net cash provided by
(used in) operating activities of approximately $37.3 million and $(9.2)
million, respectively.

Page 14 of 29 Total Pages

Investing activities for the three month periods ended April 30, 2003
and 2002 provided (used) cash of approximately $59.2 million and $(64.6)
million, respectively. These amounts include (i) net maturities and sales
(purchases) of bank time deposits and investments of approximately $70.0 million
and $(44.6) million, respectively; (ii) purchases of property and equipment of
approximately $(8.5) million and $(6.5) million, respectively; (iii)
capitalization of software development costs of approximately $(2.3) million and
$(3.7) million, respectively; and (iv) net assets acquired as a result of an
acquisition in the 2002 period of approximately $(9.7) million.

Financing activities for the three month periods ended April 30, 2003
and 2002 provided (used) cash of approximately $(81.0) million and $6.2 million,
respectively. These amounts include (i) the repurchase of Debentures of
approximately $(41.3) million during the three month period ended April 30,
2003; (ii) net repayments of bank loans and other debt of approximately $(45.1)
million and $(0.5) million, respectively; and (iii) net proceeds from the
issuance of common stock in connection with the exercise of stock options and
employee stock purchase plans of approximately $5.3 million and $6.8 million,
respectively.

During the three month period ended April 30, 2003, the Company
acquired, in open market purchases, approximately $44.6 million of face amount
of the Debentures, for approximately $41.3 million in cash, resulting in a
pre-tax gain, net of debt issuance costs, of approximately $2.8 million included
in `Interest and other income (expense), net' in the condensed consolidated
statements of operations.

As of April 30, 2003, the Company had outstanding Debentures of
approximately $346.3 million. From May 1 through June 10, 2003, the Company
acquired, in open market purchases, approximately $165.1 million of face amount
of the Debentures, for approximately $157.9 million in cash, resulting in a
pre-tax gain, net of debt issuance costs, of approximately $5.6 million.

During February 2003, Verint repaid a bank loan in the amount of
$42.0 million.

In May 2003, the Company issued $420.0 million aggregate principal
amount of its ZYPS due 2023. The ZYPS are convertible, contingent upon the
occurrence of certain events, into shares of the Company's common stock at a
conversion price of $17.97 per share. The ability of the holders to convert the
ZYPS into common stock is subject to certain conditions including, among others,
the closing price of the common stock exceeding 120% of the conversion price
over certain periods and other specified events. The Company has the right to
redeem the ZYPS for cash at any time on or after May 15, 2008, at their
principal amount. The holders have a series of put options, pursuant to which
they may require the Company to repurchase all or a portion of the ZYPS on each
of May 15 of 2008, 2013, and 2018 and upon the occurrence of certain events.

On May 19, 2003, Verint filed a Registration Statement on Form S-3,
as amended on June 3, 2003 and on June 12, 2003, relating to a public offering
by Verint and certain stockholders named in the Registration Statement of up to
5,750,000 shares of Verint's common stock, including underwriter's
over-allotment. CTI is not a selling stockholder. Should this offering be
successfully completed, the Company's ownership interest in Verint would be


Page 15 of 29 Total Pages

reduced to approximately 64.5% (or approximately 62.9% if the over-allotment is
exercised) from approximately 78.1% at April 30, 2003.

In May 2003, Verint acquired privately-held SmartSight, a developer of
IP-based video edge devices and software for wireless video transmission, for
approximately $7.0 million in cash, subject to certain adjustments, and 149,731
shares of Verint common stock. Verint further entered into a registration rights
agreement with certain former shareholders of SmartSight whereby Verint agreed
to register under the Securities Act of 1933 those shares of Verint common stock
issued to those former shareholders in connection with the acquisition.
SmartSight's solutions enable the efficient transmission and management of video
from remote locations over IP-based wireless and wireline networks.

The Company's liquidity and capital resources have not been, and are
not anticipated to be, materially affected by restrictions pertaining to the
ability of its foreign subsidiaries to pay dividends or by withholding taxes
associated with any such dividend payments.

The Company regularly examines opportunities for strategic
acquisitions of other companies or lines of business and anticipates that it may
from time to time issue additional debt and/or equity securities either as
direct consideration for such acquisitions or to raise additional funds to be
used (in whole or in part) in payment for acquired securities or assets. The
issuance of such securities could be expected to have a dilutive impact on the
Company's shareholders, and there can be no assurance as to whether or when any
acquired business would contribute positive operating results commensurate with
the associated investment.

The Company believes that its existing working capital, together with
funds generated from operations, will be sufficient to provide for its planned
operations for the foreseeable future.

CERTAIN TRENDS AND UNCERTAINTIES

The Company derives the majority of its revenue from the
telecommunications industry, which continues to experience an unprecedented
recession in capital spending by telecommunications service providers ("TSP").
The Company's operating results and financial condition have been, and will
continue to be, adversely affected by the severe decline in technology purchases
and capital expenditures by TSPs worldwide. Consequently, the Company's
operating results have deteriorated significantly in recent periods compared to
prior years and may continue to deteriorate in future periods if such conditions
remain in effect. For these reasons and the risk factors outlined below, it has
been and continues to be very difficult for the Company to accurately forecast
future revenues and operating results.

The Company's business is particularly dependent on the strength of
the telecommunications industry. The telecommunications industry, including the
Company, have been negatively affected by, among other factors, the high costs
and large debt positions incurred by some TSPs to expand capacity and enable the
provision of future services (and the corresponding risks associated with the
development, marketing and adoption of these services as discussed below),
including the cost of acquisitions of licenses to provide broadband services and
reductions in TSPs' actual and projected revenues and deterioration in their
actual and projected operating results. Accordingly, TSPs, including the
Company's customers, have significantly reduced their actual and planned
expenditures to expand or replace equipment and delayed and reduced the
deployment of services. A number of TSPs, including certain customers of the


Page 16 of 29 Total Pages

Company, also have indicated the existence of conditions of excess capacity in
certain markets.

In addition, certain TSPs have delayed the planned introduction of
new services, such as broadband mobile telephone services, that would be
supported by certain of the Company's products. Certain of the Company's
customers also have implemented changes in procurement practices and procedures,
including limitations on purchases in anticipation of estimated future capacity
requirements, and in the management and use of their networks, that have reduced
the Company's sales, which also has made it very difficult for the Company to
project future sales. The continuation and/or exacerbation of these negative
trends will have an adverse effect on the Company's future results.

In addition to loss of revenue, weakness in the telecommunications
industry has affected and will continue to affect the Company's business by
increasing the risks of credit or business failures of suppliers, customers or
distributors, by customer requirements for vendor financing and longer payment
terms, by delays and defaults in customer or distributor payments, and by price
reductions instituted by competitors to retain or acquire market share.

The Company's current plan of operations is predicated in part on a
recovery in capital expenditures by its customers. In the absence of such
improvement, the Company would experience further deterioration in its operating
results, and may determine to modify its plan for future operations accordingly,
which may include, among other things, additional reductions in its workforce.

The Company intends to continue to make significant investments in
its business, and to examine opportunities for growth through acquisitions and
strategic investments. These activities may involve significant expenditures and
obligations that cannot readily be curtailed or reduced if anticipated demand
for the associated products does not materialize or is delayed. The impact of
these decisions on future financial results cannot be predicted with assurance,
and the Company's commitment to growth may increase its vulnerability to
downturns in its markets, technology changes and shifts in competitive
conditions. The Company also may not be able to identify future suitable merger
or acquisition candidates, and even if the Company does identify suitable
candidates, it may not be able to make these transactions on commercially
acceptable terms, or at all. If the Company does make acquisitions, it may not
be able to successfully incorporate the personnel, operations and customers of
these companies into the Company's business. In addition, the Company may fail
to achieve the anticipated synergies from the combined businesses, including
marketing, product integration, distribution, product development and other
synergies. The integration process may further strain the Company's existing
financial and managerial controls and reporting systems and procedures. This may
result in the diversion of management and financial resources from the Company's
core business objectives. In addition, an acquisition or merger may require the
Company to utilize cash reserves, incur debt or issue equity securities, which
may result in a dilution of existing stockholders, and the Company may be
negatively impacted by the assumption of liabilities of the merged or acquired
company. Due to rapidly changing market conditions, the Company may find the
value of its acquired technologies and related intangible assets, such as
goodwill as recorded in the Company's financial statements, to be impaired,
resulting in charges to operations. The Company may also fail to retain the
acquired or merged companies' key employees and customers.


Page 17 of 29 Total Pages

The Company has made, and in the future, may continue to make
strategic investments in other companies. These investments have been made in,
and future investments will likely be made in, immature businesses with unproven
track records and technologies. Such investments have a high degree of risk,
with the possibility that the Company may lose the total amount of its
investments. The Company may not be able to identify suitable investment
candidates, and, even if it does, the Company may not be able to make those
investments on acceptable terms, or at all. In addition, even if the Company
makes investments, it may not gain strategic benefits from those investments.

The Company's products involve sophisticated hardware and software
technology that performs critical functions to highly demanding standards. There
can be no assurance that the Company's current or future products will not
develop operational problems, which could have a material adverse effect on the
Company.

The telecommunications industry is subject to rapid technological
change. The introduction of new technologies in the telecommunications market,
including the delay in the adoption of such new technologies, and new
alternatives for the delivery of services are having, and can be expected to
continue to have, a profound effect on competitive conditions in the market and
the success of market participants, including the Company. In addition, some of
the Company's products, such as voicemail, may experience a decline in usage as
a result of the introduction of new technologies and the adoption and increased
use of exisiting technologies, which may include enhanced areas of coverage for
mobile telephones and Caller ID type services. The Company's continued success
will depend on its ability to correctly anticipate technological trends in its
industries, to react quickly and effectively to such trends and to enhance its
existing products and to introduce new products on a timely and cost-effective
basis. As a result, the life cycle of the Company's products is difficult to
estimate. The Company's new product offerings may not properly integrate into
existing platforms and the failure of new product offerings to be accepted by
the market could have a material adverse effect on our business, results of
operations, and financial condition. In addition, changing industry and market
conditions may dictate strategic decisions to restructure some business units
and discontinue others. Discontinuing a business unit or product line may result
in the Company recording accrued liabilities for special charges, such as costs
associated with a reduction in workforce. These strategic decisions could result
in changes to determinations regarding a product's useful life and the
recoverability of the carrying basis of certain assets.

The Company relies on a limited number of suppliers and manufacturers
for specific components and may not be able to find alternate manufacturers that
meet its requirements and existing or alternative sources may not be available
on favorable terms and conditions. Thus, if there is a shortage of supply for
these components, the Company may experience an interruption in its product
supply. In addition, loss of third party software licensing could materially and
adversely affect the Company's business, financial condition and results of
operations.

The telecommunications industry continues to undergo significant
change as a result of deregulation and privatization worldwide, reducing
restrictions on competition in the industry. Unforeseen changes in the
regulatory environment also may have an impact on the Company's revenues and/or
costs in any given part of the world. The worldwide ESS system industry is
already highly competitive and the Company expects competition to intensify. The
Company believes that existing competitors will continue to present substantial
competition, and that other companies, many with considerably greater financial,
marketing and sales resources than the Company, may enter the ESS system
markets. Moreover, as the Company enters into new markets as a result of its own


Page 18 of 29 Total Pages

research and development efforts or acquisitions, it is likely to encounter new
competitors.

The market for the Company's digital security and surveillance and
enterprise business intelligence products in the past has been affected by
weakness in general economic conditions, delays or reductions in customers'
information technology spending and uncertainties relating to government
expenditure programs. The Company's business generated from government contracts
may be adversely affected if: (i) the Company's reputation or relationship with
government agencies is impaired, (ii) the Company is suspended or otherwise
prohibited from contracting with a domestic or foreign government or any
significant law enforcement agency, (iii) levels of government expenditures and
authorizations for law enforcement and security related programs decrease,
remain constant or shift to programs in areas where the Company does not provide
products and services, (iv) the Company is prevented from entering into new
government contracts or extending existing government contracts based on
violations or suspected violations of procurement laws or regulations, (v) the
Company is not granted security clearances required to sell products to domestic
or foreign governments or such security clearances are revoked, or (vi) there is
a change in government procurement procedures. Competitive conditions in this
sector also have been affected by the increasing use by certain potential
customers of their own internal development resources rather than outside
vendors to provide certain technical solutions. In addition, a number of
established government contractors, particularly developers and integrators of
technology products, have taken steps to redirect their marketing strategies and
product plans in reaction to cut-backs in their traditional areas of focus,
resulting in an increase in the number of competitors and the range of products
offered in response to particular requests for proposals.

The Company has historically derived a significant portion of its
sales and operating profit from contracts for large system installations with
major customers. The Company continues to emphasize large capacity systems in
its product development and marketing strategies. Contracts for large
installations typically involve a lengthy and complex bidding and selection
process, and the ability of the Company to obtain particular contracts is
inherently difficult to predict. 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. The Company's future operating results may accordingly exhibit a
higher degree of volatility than the operating results of other companies in its
industries that have adopted different strategies, and also may be more volatile
than the Company has experienced in prior periods. The degree of dependence by
the Company on large system orders, and the investment required to enable the
Company 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 its business. The Company's gross margins also
may be adversely affected by increases in material or labor costs, obsolescence
charges, price competition and changes in channels of distribution or in the mix
of products sold.

Geopolitical, economic and military conditions could directly affect
the Company's operations. The recent outbreak of severe acute respiratory
syndrome ("SARS") has curtailed travel to and from certain countries (primarily
in the Asia-Pacific region). Continued or additional restrictions on travel to
and from these and other regions on account of SARS could have a material
adverse effect on the Company's business, results of operations, and financial
condition. The continued threat of terrorism and heightened security and


Page 19 of 29 Total Pages

military action in response to this threat, or any future acts of terrorism, may
cause disruptions to the Company's business. To the extent that such disruptions
result in delays or cancellations of customer orders, or the manufacture or
shipment of the Company's products, our business, operating results and
financial condition could be materially and adversely affected. More recently,
the U.S. military involvement in overseas operations including, for example, the
war with Iraq, could have a material adverse effect on the Company's business,
results of operations, and financial condition.

Since the establishment of the State of Israel in 1948, a number of
armed conflicts have taken place between Israel and its Arab neighbors, and the
continued state of hostility, varying in degree and intensity, has led to
security and economic problems for Israel. Since October 2000, there has been a
significant increase in violence, primarily in the West Bank and Gaza Strip, and
more recently Israel has experienced terrorist incidents within its borders.
During this period, peace negotiations between Israel and representatives of the
Palestinian Authority have been sporadic and currently are suspended. The
Company could be adversely affected by hostilities involving Israel, the
interruption or curtailment of trade between Israel and its trading partners, or
a significant downturn in the economic or financial condition of Israel. In
addition, the sale of products manufactured in Israel may be adversely affected
in certain countries by restrictive laws, policies or practices directed toward
Israel or companies having operations in Israel. The continuation or
exacerbation of violence in Israel or the outbreak of violent conflicts
involving Israel may impede the Company's ability to sell its products or
otherwise adversely affect the Company. In addition, many of the Company's
Israeli employees in Israel are required to perform annual compulsory military
service in Israel and are subject to being called to active duty at any time
under emergency circumstances. The absence of these employees may have an
adverse effect upon the Company's operations.

The Company's costs of operations have at times been affected by
changes in the cost of its operations in Israel, resulting from changes in the
value of the Israeli shekel relative to the United States dollar, which for
certain periods had a negative impact, and from difficulties in attracting and
retaining qualified scientific, engineering and technical personnel in Israel,
where the availability of such personnel has at times been severely limited.
Changes in these cost factors have from time to time been significant and
difficult to predict, and could in the future have a material adverse effect on
the Company's results of operations.

The Company's historical operating results reflect substantial
benefits 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 ("Approved
Enterprises") in Israel. Some of these programs and tax benefits have ceased and
others may not be continued in the future and the availability of such benefits
to the Company may be affected by a number of factors, including budgetary
constraints resulting from adverse economic conditions, government policies and
the Company's ability to satisfy eligibility criteria.

The Israeli government has reduced the benefits available under some
of these programs in recent years, and Israeli government authorities have
indicated that the government may further reduce or eliminate some of these
benefits in the future. The Company has regularly participated in a conditional
grant program administered by the Office of the Chief Scientist of the Ministry
of Industry and Trade of the State of Israel ("OCS") under which it has received
significant benefits through reimbursement of up to 50% of qualified research


Page 20 of 29 Total Pages

and development expenditures. Verint currently pays royalties, of between 3% and
5% (or 6% under certain circumstances) of associated product revenues (including
service and other related revenues) to the Government of Israel for repayment of
benefits received under this program. Such royalty payments by Verint are
currently required to be made until the government has been reimbursed the
amounts received by the Company plus, for amounts received under projects
approved by the OCS after January 1, 1999, interest on such amount at a rate
equal to the 12-month LIBOR rate in effect on January 1 of the year in which
approval is obtained. During fiscal 2001, Comverse entered into an arrangement
with the OCS whereby Comverse agreed to pay a lump sum royalty amount for all
past amounts received from the OCS. In addition, Comverse began to receive lower
amounts from the OCS than it had historically received, but will not have to pay
royalty amounts on such grants. The amount of reimbursement received by the
Company under this program has been reduced significantly, and the Company does
not expect to receive significant reimbursement under this program in the
future. In addition, permission from the Government of Israel is required for
the Company 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, the
Company 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 continued reduction in the benefits received by the
Company under the program, or the termination of its eligibility to receive
these benefits at all in the future, could adversely affect the Company's
operating results.

The Company's overall effective tax rate benefits from the tax
moratorium provided by the Government of Israel for Approved Enterprises
undertaken in that country. The Company's effective tax rate may increase in the
future due to, among other factors, the increased proportion of its taxable
income associated with activities in higher tax jurisdictions, and by the
relative ages of the Company's eligible investments in Israel. The tax
moratorium on income from the Company's Approved Enterprise investments made
prior to 1997 is four years, whereas subsequent Approved Enterprise projects are
eligible for a moratorium of only two years. Reduced tax rates apply in each
case for certain periods thereafter. To be eligible for these tax benefits, the
Company must continue to meet conditions, including making specified investments
in fixed assets and financing a percentage of investments with share capital. If
the Company fails to meet such conditions in the future, the tax benefits would
be canceled and the Company could be required to refund the tax benefits already
received. Israeli authorities have indicated that additional limitations on the
tax benefits associated with Approved Enterprise projects may be imposed for
certain categories of taxpayers, which would include the Company. If further
changes in the law or government policies regarding those programs were to
result in their termination or adverse modification, or if the Company were to
become unable to participate in, or take advantage of, those programs, the cost
of the Company's operations in Israel would increase and there could be a
material adverse effect on the Company's results of operations and financial
condition.

The Company's success is dependent on recruiting and retaining key
management and highly skilled technical, managerial, sales, and marketing
personnel. The market for highly skilled personnel remains very competitive
despite the current economic conditions. The Company's ability to attract and
retain employees also may be affected by recent cost control actions, including
reductions in the Company's workforce and the associated reorganization of
operations.

Page 21 of 29 Total Pages

The occurrence or perception of security breaches within the Company
could harm the Company's business, financial condition and operating results.
While the Company implements sophisticated security measures, third parties may
attempt to breach the Company's security through computer viruses, electronic
break-ins and other disruptions. If successful, confidential information,
including passwords, financial information, or other personal information may be
improperly obtained and the Company may be subject to lawsuits and other
liability. Even if the Company is not held liable, a security breach could harm
the Company's reputation, and even the perception of security risks, whether or
not valid, could inhibit market acceptance of the Company's products.

The Company currently derives a significant portion of its total
sales from 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. The Company is
required to obtain export licenses and other authorizations from applicable
governmental authorities for certain countries within which it conducts
business. The failure to receive any required license or authorization would
hinder the Company's ability to sell its products and could adversely affect the
Company's business, results of operations and financial condition. In addition,
legal uncertainties regarding liability, compliance with local laws and
regulations, labor laws, employee benefits, currency restrictions, difficulty in
accounts receivable collection, longer collection periods and other requirements
may have a negative impact on the Company's operating results.

Volatility in international currency exchange rates may have a
significant impact on the Company's operating results. The Company has, and
anticipates that it will continue to receive, contracts denominated in foreign
currencies, particularly the euro. As a result of the unpredictable timing of
purchase orders and payments under such contracts and other factors, it is often
not practicable for the Company to effectively hedge the risk of significant
changes in currency rates during the contract period. The Company may experience
risk associated with the failure to hedge the exchange rate risks associated
with contracts denominated in foreign currencies and its operating results have
been negatively impacted for certain periods and recently have been positively
impacted and may continue to be affected to a material extent by the impact of
currency fluctuations. Operating results may also be affected by the cost of
such hedging activities that the Company does undertake.

While the Company generally requires employees, independent
contractors and consultants to execute non-competition and confidentiality
agreements, the Company's intellectual property or proprietary rights could be
infringed or misappropriated, which could result in expensive and protracted
litigation. The Company relies on a combination of patent, copyright, trade
secret and trademark law to protect its technology. Despite the Company's
efforts to protect its intellectual property and proprietary rights,
unauthorized parties may attempt to copy or otherwise obtain and use its
products or technology. Effectively policing the unauthorized use of the
Company's products is time-consuming and costly, and there can be no assurance
that the steps taken by the Company will prevent misappropriation of its
technology, particularly in foreign countries where in many instances the local
laws or legal systems do not offer the same level of protection as in the United
States.

Page 22 of 29 Total Pages

If others claim that the Company's products infringe their
intellectual property rights, the Company may be forced to seek expensive
licenses, reengineer its products, engage in expensive and time-consuming
litigation or stop marketing its products. The Company attempts to avoid
infringing known proprietary rights of third parties in its product development
efforts. The Company does not regularly conduct comprehensive patent searches to
determine whether the technology used in its products infringes patents held by
third parties, however. There are many issued patents as well as patent
applications in the fields in which the Company is engaged. Because patent
applications in the United States are not publicly disclosed until the patent is
issued, applications may have been filed which relate to the Company's software
and products. If the Company were to discover that its products violated or
potentially violated third-party proprietary rights, it might not be able to
obtain licenses to continue offering those products without substantial
reengineering. Any reengineering effort may not be successful, nor can the
Company be certain that any licenses would be available on commercially
reasonable terms.

Substantial litigation regarding intellectual property rights exists
in technology related industries, and the Company expects that its products may
be increasingly subject to third-party infringement claims as the number of
competitors in its industry segments grows and the functionality of software
products in different industry segments overlaps. In addition, the Company has
agreed to indemnify certain customers in certain situations should it be
determined that its products infringe on the proprietary rights of third
parties. Any third-party infringement claims could be time consuming to defend,
result in costly litigation, divert management's attention and resources, cause
product and service delays or require the Company to enter into royalty or
licensing agreements. Any royalty or licensing arrangements, if required, may
not be available on terms acceptable to the Company, if at all. A successful
claim of infringement against the Company and its failure or inability to
license the infringed or similar technology could have a material adverse effect
on its business, financial condition and results of operations.

The Company holds a large proportion of its net assets in cash
equivalents and short-term investments, including a variety of public and
private debt and equity instruments, and has made significant venture capital
investments, both directly and through private investment funds. Such
investments subject the Company to the risks inherent in the capital markets
generally, and to the performance of other businesses over which it has no
direct control. Given the relatively high proportion of the Company's liquid
assets relative to its overall size, the results of its operations are
materially affected by the results of the Company's capital management and
investment activities and the risks associated with those activities. Declines
in the public equity markets have caused, and may be expected to continue to
cause, the Company to experience realized and unrealized investment losses. In
addition, reduction in prevailing interest rates due to economic conditions or
government policies has had and may continue to have an adverse impact on the
Company's results of operations.

The severe decline in the public trading prices of equity securities,
particularly in the technology and telecommunications sectors, and corresponding
decline in values of privately-held companies and venture capital funds in which
the Company has invested, have, and may continue to have, an adverse impact on
the Company's financial results. The Company has in the past benefited from the
long-term rise in the public trading price of its shares in various ways,
including its ability to use equity incentive arrangements as a means of
attracting and retaining the highly qualified employees necessary for the growth
of its business and its ability to raise capital on relatively attractive
conditions. The decline in the price of the Company's shares, and the overall


Page 23 of 29 Total Pages

decline in equity prices generally, and in the shares of technology companies in
particular, can be expected to make it more difficult for the Company to
significantly rely on equity incentive arrangements as a means to recruit and
retain talented employees.

The trading price of the Company's shares has been affected by the
factors disclosed herein as well as prevailing economic and financial trends and
conditions in the public securities markets. Share prices of companies in
technology-related industries, such as the Company, tend to exhibit a high
degree of volatility. The announcement of financial results that fall short of
the results anticipated by the public markets could have an immediate and
significant negative effect on the trading price of the Company's shares in any
given period. Such shortfalls may result from events that are beyond the
Company's immediate control, can be unpredictable and, since a significant
proportion of the Company's sales during each fiscal quarter tend to occur in
the latter stages of the quarter, may not be discernible until the end of a
financial reporting period. These factors may contribute to the volatility of
the trading value of its shares regardless of the Company's long-term prospects.
The trading price of the Company's shares 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 telecommunications equipment
industry in general, and the Company's business segments in particular, which
may not have any direct relationship with the Company's business or prospects.

FORWARD-LOOKING STATEMENTS

From time to time, the Company makes forward-looking statements.
Forward-looking statements include financial projections, statements of plans
and objectives for future operations, statements of future economic performance,
and statements of assumptions relating thereto.

The Company may include forward-looking statements in its periodic
reports to the Securities and Exchange Commission on Forms 10-K, 10-Q, and 8-K,
in its annual report to shareholders, in its proxy statements, in its press
releases, in other written materials, and in statements made by employees to
analysts, investors, representatives of the media, and others.

By their very nature, forward-looking statements are subject to
uncertainties, both general and specific, and risks exist that predictions,
forecasts, projections and other forward-looking statements will not be
achieved. Actual results may differ materially due to a variety of factors,
including without limitation those discussed under "Certain Trends and
Uncertainties" and elsewhere in this report. Investors and others should
carefully consider these and other uncertainties and events, whether or not the
statements are described as forward-looking.

Forward-looking statements made by the Company are intended to apply
only at the time they are made, unless explicitly stated to the contrary.
Moreover, whether or not stated in connection with a forward-looking statement,
the Company undertakes no obligation to correct or update a forward-looking
statement should the Company later become aware that it is not likely to be
achieved. If the Company were in any particular instance to update or correct a
forward-looking statement, investors and others should not conclude that the
Company will make additional updates or corrections thereafter.


Page 24 of 29 Total Pages

ITEM 3. Quantitative and Qualitative Disclosures About Market Risk.

Refer to Item 7A in the Company's Annual Report on Form 10-K for a
discussion about the Company's exposure to market risks.


ITEM 4. Controls and Procedures.

(a) The Company maintains disclosure controls and procedures that are
designed to ensure that information required to be disclosed in the Company's
filings under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported within the periods specified in the rules and forms of
the Securities and Exchange Commission. Such information is accumulated and
communicated to the Company's management, including its principal executive
officer and principal financial officer, as appropriate, to allow timely
decisions regarding required disclosure. The Company's management, including the
principal executive officer and the principal financial officer, recognizes that
any set of controls and procedures, no matter how well designed and operated,
can provide only reasonable assurance of achieving the desired control
objectives.

Within 90 days prior to the filing date of this quarterly report on
Form 10-Q, the Company has carried out an evaluation, under the supervision and
with the participation of the Company's management, including the Company's
principal executive officer and the Company's principal financial officer, of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based on such evaluation, the Company's principal
executive officer and principal financial officer concluded that the Company's
disclosure controls and procedures are effective.

(b) There have been no significant changes in the Company's internal
controls or in other factors that could significantly affect the internal
controls subsequent to the date of their evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.










Page 25 of 29 Total Pages

PART II
Other Information


ITEM 1. Legal Proceedings.

None.


ITEM 6. Exhibits and Reports on Form 8-K.

(a) Exhibit Index.

99.1 Certification of Chief Executive Officer pursuant to 18 U.S.C.
Section 1350, as adopted, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*

99.2 Certification of Chief Financial Officer pursuant to 18 U.S.C.
Section 1350, as adopted, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002*

*These exhibits are being "furnished" with this periodic report and are not
deemed "filed" with the Securities and Exchange Commission and are not
incorporated by reference in any filing of Comverse Technology, Inc. under the
Securities Act of 1933 or the Securities Exchange Act of 1934, whether made
before or after the date hereof and irrespective of any general incorporation by
reference language in any such filings.


(b) Reports on Form 8-K.

During the first quarter of 2003, the Company furnished to
the Securities and Exchange Commission an Item 9 on Form 8-K on April
30, 2003 containing the certifications of the Chief Executive Officer
and the Chief Financial Officer accompanying the Company's Form 10-K
filed on April 30, 2003, as required pursuant to 18 U.S.C. Section
1350, as adopted, pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002.










Page 26 of 29 Total Pages

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


COMVERSE TECHNOLOGY, INC.

Dated: June 13, 2003 /s/ Kobi Alexander
--------------------------------
Kobi Alexander
Chairman of the Board
and Chief Executive Officer



Dated: June 13, 2003 /s/ David Kreinberg
--------------------------------
David Kreinberg
Executive Vice President
and Chief Financial Officer











Page 27 of 29 Total Pages

CERTIFICATIONS
--------------

I, Kobi Alexander, the Chief Executive Officer of Comverse
Technology, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Comverse
Technology, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
"Evaluation Date"); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date: June 13, 2003 /s/ Kobi Alexander
-----------------------------------
Name: Kobi Alexander
Title: Chief Executive Officer



Page 28 of 29 Total Pages

I, David Kreinberg, the Chief Financial Officer of Comverse
Technology, Inc., certify that:

1. I have reviewed this quarterly report on Form 10-Q of Comverse
Technology, Inc.;

2. Based on my knowledge, this quarterly report does not contain any
untrue statement of a material fact or omit to state a material fact necessary
to make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by this
quarterly report;

3. Based on my knowledge, the financial statements, and other
financial information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash flows
of the registrant as of, and for, the periods presented in this quarterly
report;

4. The registrant's other certifying officers and I are responsible
for establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:

a) designed such disclosure controls and procedures to ensure
that material information relating to the registrant,
including its consolidated subsidiaries, is made known to
us by others within those entities, particularly during
the period in which this quarterly report is being
prepared;

b) evaluated the effectiveness of the registrant's disclosure
controls and procedures as of a date within 90 days prior
to the filing date of this quarterly report (the
"Evaluation Date"); and

c) presented in this quarterly report our conclusions about
the effectiveness of the disclosure controls and
procedures based on our evaluation as of the Evaluation
Date;

5. The registrant's other certifying officers and I have disclosed,
based on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):

a) all significant deficiencies in the design or operation of
internal controls which could adversely affect the
registrant's ability to record, process, summarize and
report financial data and have identified for the
registrant's auditors any material weaknesses in internal
controls; and

b) any fraud, whether or not material, that involves
management or other employees who have a significant role
in the registrant's internal controls; and

6. The registrant's other certifying officers and I have indicated in
this quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal controls
subsequent to the date of our most recent evaluation, including any corrective
actions with regard to significant deficiencies and material weaknesses.



Date: June 13, 2003 /s/ David Kreinberg
------------------------------------
Name: David Kreinberg
Title: Chief Financial Officer



Page 29 of 29 Total Pages