Amdocs Ltd. Business Information, Profile, and History

Company Perspectives:

For two decades, we have been helping leading communications providers across the world turn their visions into reality. We lead the communications systems market with outstanding products, carrier-grade scalability and an unparalleled track record of delivery and reliability. We support all lines of business, including mobile and wireline, voice and IP, and prepaid and postpaid. We fully integrate CRM, billing and ordering systems with a unified customer view.

History of Amdocs Ltd.

Amdocs Ltd. is one of the world's leading providers of billing, customer relationship management (CRM), and order management software systems to the telecommunications industry. The company delivers end-to-end software systems and support services that enable telecommunications providers to offer multiple platform, and multiple services billing, ordering, and support to their fixed-line and mobile telephone customers. With the turn of the new century, Amdocs has also begun to provide outsourcing services, taking over the billing, customer care, and customer relationship management services for many of its top customers. The company is one of the only companies in its field providing software systems capable of handling telephone networks ranging from 20 to 40 million subscribers. Since the late 1990s, Amdocs has made a series of key acquisitions, including International Telecommunications Data Systems (ITDS) of the United States in 1999; Canada's Solect Technology Group in 2000; and Clarify, from Nortel Networks, in 2001. The acquisitions have helped the company to position itself as a full-service provider of turnkey CRM solutions. Originally based in Ra'anana, Israel, where the company continues to maintain the bulk of its research and development activity, as well as nearly half of its 8,600 employees, Amdocs has moved its headquarters to Chesterfield, Missouri. The company is also listed on the New York Stock Exchange, after one of the largest initial public offerings of the late 1990s. SBC Communications, the parent company for Southwestern Bell, was one of the key forces behind the establishment of the company and remains its largest single shareholder, at 14 percent of shares, and largest customer as well. Other prominent customers include Deutsche Telecom, British Telecom, Vodaphone, Bell Canada, and Nextel. The company is led by Chairman and CEO Bruce K. Anderson, and Dov Baharav, president and CEO of Amdocs Management Ltd., the company's management group.

Automating the Yellow Pages in the 1980s

Israel's Avinoam Naor graduated from the University of Tel Aviv with a degree in computer science in the mid-1970s. Naor's interest from the outset was the telecommunications industry, and in the late 1970s he found a niche in which to work: that of automating telephone directory systems. By the early 1980s, Naor had perfected the industry's first computer-based directory assistance system. In 1982, Naor, together with investors including Morris Kahn, launched Aurec Information and Directory Systems, which was brought under Kahn-controlled Aurec Group, one of the leading telecommunications providers in Israel at the time. Another primary partner in Aurec Group was Southwestern Bell, which was to become one of the Naor-led company's major customers.

Aurec continued to develop products geared toward the telephone directory market. In 1984, the company launched a new unit, Automated Directory Systems, as a joint venture with Southwestern Bell. The new company was formed as the commercial and support services arm for a new Aurec product, a software-based publishing system for telephone directories. Southwestern Bell stepped up its participation in that joint venture in 1985, becoming an equal partner.

By the end of the 1980s, Aurec Information had succeeded in gaining the worldwide leadership in its telephone directory niche market, and had extended its operations to include offices in Israel, the United States, Europe, and elsewhere. In the late 1980s, the company extended its product line again, to include software solutions for advertising sales and placement with telephone directories. Southwestern once again benefited as one of the first users of the Aurec system, which was added in 1988. As one Southwestern Bell Yellow Pages executive told the St. Louis Post-Dispatch: "It makes it easier for our sales organization to sell advertising, and it makes it easier for us to actually publish the information in the directory."

Part of Aurec's success was its conservative approach to growth and a commitment to creating systems that worked--from the beginning, the company was able to claim a 100 percent implementation rate. In addition, Aurec Information proved equally adept at keeping its clients, boasting that it had never lost a client to a competing system.

Growing the Business: 1990s

Despite its success in capturing the lead of its core market, Aurec Information remained a modestly sized operation into the 1990s. Yet Naor and his team, which by then included Dov Baharav, appointed as president of the company's U.S. subsidiary in 1991, had identified a new and high-potential market for the company's software systems development. As Naor stated in an interview with the Wall Street Corporate Reporter: "In the early 1990s, we realized that telecommunications was going to become a booming industry with huge potential so we began developing products to service this industry."

Aurec Information set out to develop a full-service billing and customer care software system. This package, called Ensemble, was ready for the market in 1995. The advent of Ensemble proved the turning point in the company's transformation from a small-sized niche market player to an industry powerhouse ranked among the world's top 30 software companies. As part of its transformation, Aurec Information was restructured into a new holding company, Amdocs Ltd., which grouped Aurec Information and other Aurec Group assets. Registered as an Isle of Guernsey company, Amdocs featured as major shareholders the investment firm Welsh, Carson, Anderson & Stowe based in New York, which held 29.2 percent; Morris Kahn, through Amdocs International Ltd., with 23.4 percent; and SBC Communications, with 23.4 percent.

While continuing to develop and support its telephone directory business--which had been implemented by nearly all of the telephone services providers in the United States--Amdocs began asserting itself deeper into the telecommunications industry. SBC remained the company's single largest customer, accounting for more than 40 percent of its sales, while five other major customers made up another nearly 43 percent of the company's sales, which topped $200 million in 1996. Yet the successful rollout of Amdocs' Ensemble customer care software system quickly enabled the company to reduce its reliance on this core customer group.

Part of the appeal of Ensemble and other Amdocs systems was the increasing complexity of the telecommunications industry in general. The mid- to late 1990s were to see the widescale implementation of a variety of new technologies, including the explosive growth of the mobile telephone market. As telecommunications companies were able to offer their customers a growing variety of products, services, and pricing and billing options, these companies found themselves unable to develop billing, customer service, and other CRM systems robust enough to handle the increasingly complex billing and servicing needs. As an early player in the CRM systems market, with a specific focus on the telecommunications industry, Amdocs proved uniquely placed to profit from this trend.

Amdocs began preparations to go public in 1997 when it moved its corporate headquarters to Chesterfield, Missouri. At that time, Bruce Anderson, from Welsh, Carson, Anderson & Stowe, was named Amdoc Ltd.'s chairman and chief executive officer, while Naor maintained the CEO spot with the Amdoc's main operating company, Amdocs Management Ltd. The bulk of the company's research and development operations, including most of its employees, remained at Amdoc's Ra'anana, Israel headquarters.

By 1998, Amdocs was ready to go public, selling 11.7 percent of its stock on the New York Stock Exchange, and raising more than $250 million in an initial public offering that counted as the largest ever made by an Israeli company. The company used that money to pay down debt, then began to look toward expanding its activities, including branching out into the growing Internet telephony market through a cooperation agreement with Vocaltec.

By the end of 1998, Amdocs was riding high on the surging telecommunications industry. Posting revenues of more than $400 million, the company had successfully implemented its Ensemble system into nearly all of the United States' RBOCs (Regional Bell Operating Companies, also known as "Baby Bells"), as well as GTE and Sprint. Amdocs was also making strong headway into the European and South American markets.

A new wave of consolidations within the telecommunications industry, rather than reduce the pool of Amdocs' customers, instead opened up new possibilities as the newer, larger operators, often combining multinational telephone systems and a variety of traditional and cutting-edge services, turned to Amdocs to solve the new complexities of their billing, ordering, and customer service needs.

Amdocs now began to seek to position itself as a full-service solutions provider. While the company continued to target organic growth, it now began to seek to complement its existing operations with a number of key acquisitions. One of the first of these came in March 1999, when Amdocs paid $400 million in

Telecommunications Services Solutions Provider in the 21st Century

Amdocs continued to put the pieces of its acquisition puzzle in place at the turn of the millennium. In 2000, the company paid $1 billion in shares to acquire Solect Technology Group. Based in Toronto, Solect had established itself as a leading provider of Internet protocol (IP) billing and customer care software, with clients including AT&T Canada, British Telecommunications, GTE, Swiss Online, Sun Microsystems, and Cisco Systems.

In 2001, Amdocs moved to enhance its product offering still further, when it paid Nortel Networks $200 million to acquire Clarify Inc. That company had been founded in 1990 with a focus on customer care services, and particularly on developing customer complaint and product defect tracking software. After going public in 1996, Clarify adapted its software systems to the telecommunications industry, launching the Clarfiy CommCenter; in 1998 Clarify launched a new product, eFrontOffice, which enabled web-site based customer care services. In 2000, Clarify was acquired for $2.1 billion by Nortel Networks as part of that company's spending spree--which ended with the tech market slump at the turn of the millennium.

The addition of Clarify enabled Amdocs to complete its own product offering, and by the beginning of 2002 the company launched what it called the industry's first end-to-end fully integrated CRM, billing, and order management system for the communications industry. Meanwhile, Amdocs had moved into a new direction at the end of 2001, when it began offering outsourcing services for its customers. One of the first to take up Amdocs' outsourcing services was Nextel Communications, which turned over its billing functions to Amdocs in a seven-year contract. The idea seemed to catch on quickly, as Amdoc signed a five-year billing services contract with Verizon Communications in early 2002.

By then, Amdocs had grown to a software industry powerhouse, with annual revenues of more than $1.5 billion, placing it among the top 30 of the world's software companies. At the same time, Amdocs maintained its longstanding tradition of perfection, as it continued to boast a 100 percent implementation success rate after 20 years in business.

Principal Subsidiaries: Amdocs operates subsidiaries in the United States, Canada, the United Kingdom, Israel, Cyprus, Ireland, France, Italy, Germany, Australia, Spain, Japan, and Brazil.

Principal Competitors: Accenture Ltd.; ADC Telecommunications, Inc.; ALLTEL Corporation; American Management Systems, Incorporated; Cap Gemini Ernst & Young; Computer Sciences Corporation; Convergys Corporation; DSET Corporation; Electronic Data Systems Corporation; Eyretel plc; International Business Machines Corporation; Lucent Technologies Inc.; MetaSolv, Inc.; Nortel Networks Limited; Portal Software, Inc.; Siebel Systems, Inc.; Telcordia Technologies, Inc.

Chronology

• Key Dates:
• 1982: Avinoam Naor and a group of investors found Aurec Information and Directory Services in order to develop and market directory information services software.
• 1984: Southwestern Bell acquires 50 percent of Aurec Information and becomes its primary customer.
• 1988: Aurec Information launches directory advertising sales and publishing software systems.
• 1995: Aurec Information reorganizes as Amdocs Ltd.
• 1998: Amdocs goes public on the New York Stock Exchange.
• 1999: Company acquires Architel, based in Toronto, and International Telecommunications Data Systems Inc., based in Connecticut.
• 2000: Company acquires Solect Technology Group in $1 billion stock swap.
• 2001: Amdocs acquires Clarify Inc. for $200 million from Nortel Networks.
• 2002: Company launches fully integrated CRM billing, customer services, and order management software for the telecommunications industry.