Despite the Recent Wave of Global Terrorism, Verint Has Been Foundering

The security and surveillance firm lost 45% of its stock value in a year, and the departure of company executives and staff layoffs have raised questions about the scope of its problems.

Omri Zerachovitz
Omri Zerachovitz
Send in e-mailSend in e-mail
Dan Bodner, Verint Systems Inc. CEO
Dan Bodner, Verint Systems Inc. CEO
Omri Zerachovitz
Omri Zerachovitz

The terrorist attacks in Paris and Brussels have boosted the need for advanced ways to provide better protection and intelligence. One of the logical beneficiaries of this trend should be Verint, which is heavily involved in the security intelligence field, but the company’s security intelligence division has actually been on the downswing, and that is expected to continue this year.

The division’s difficulties are one reason Verint has missed financial forecasts in recent quarters. The company’s share value plunged 45% in the course of a year, reducing the firm’s value to $2.2 billion.

Verint explains the weakness in the security division as a result of the poor economic situation in markets in emerging countries, which are responsible for about half of the division’s revenues. The company’s customers in these markets are government security agencies. At the end of March, in a conference call with analysts, Verint CEO Dan Bodner explained that the company was suffering from a contraction of the budgets that these clients had available along with foreign currency exchange rate difficulties in relation to the U.S. dollar.

Despite external influences on the company, the problems at Verint appear to be deeper. Its security division has undergone a shake-up in recent months that included the replacement of senior company executives, major organizational changes; the layoff of about 10% of the security division’s personnel and consolidation of positions. But the efficiency measures took employees by surprise and left a gloomy mood at the company.


While workers were used to volatility in the security division because the work is conducted largely on a project basis, they didn’t anticipate being sent home. The remaining employees fear they haven’t heard the last word when it comes to layoffs, particularly if Verint’s financial performance doesn’t improve.

There have also been layoffs in the cyber intelligence division, where over the past two years a large number of employees were recruited following a major job that the company landed. The head of the division, Hudi Zack, also left the company, and in January joined a startup, Cytegic.

Another major personnel change involved the departure after three years on the job of Hanan Gino, who headed the Israeli operations at Verint, which maintains its corporate headquarters in Melville, New York. Gino, who joined the staff at Verint after many years at Orbotech, was also head of Verint’s intelligence, communications and cyber division. Verint announced Gino’s departure at the beginning of February, but it consisted of notice to the U.S. Securities and Exchange Commission without a press release in the United States. The absence of the press release was considered unusual even for Verint, which is viewed as relatively publicity-shy.

Gino’s replacement is Elad Sharon, who has been with the company for 18 years. In the call with analysts following the release of the company’s financial results, Verint CEO Bodner was asked about the appointment and noted Sharon’s long presence at the company. He knows the market, the company’s customers and its cyber business well, Bodner said, adding that Sharon should be able to help Verint meet the challenges in emerging markets and return the company to growth when the economies of those countries improve.

About 60% of Verint’s revenues come from the civilian sector, with the balance coming from its security-related business. In both sectors, Verint is involved in analyzing information from a range of sources to help customers make quick and proper decisions. So, for example, in the security sector, the company provides surveillance services, video analysis technology and cyber products. Verint’s products are used to provide security for cities and airports.

In the business sector, Verint offers clients customer service products in settings involving contact by phone and face-to-face. This includes call-analysis technology and the collection of data from the calls, for marketing purposes, for example. Verint also provides video data analytics to retailers to help them figure out how their floor space is being used.

In his conference call, Bodner highlighted the problems in the security division, but over the past year, the company wasn’t a stellar player in the business sector either. Overall company revenues last year were $1.13 billion, down 2% from 2014. The business intelligence portion of the company’s business generated $630 million in 2015, a drop of 9% over 2014. Last year the security division’s revenues actually increased, by 7%, to $505 million, but the 4th quarter was weak and division revenues slumped 10% for the quarter.

Verint reported 2015 adjusted (non-GAAP) net profits of $191 million, off 4% from the 2014 figure. Earnings per share last year were $3.35 compared to $3.04 in 2014.

The company’s financial forecast surprised the analysts. It is not expecting any growth. In the civilian sector, Bodner said revenue growth should be in line with the 7% rate over the past five years. Verint’s civilian-sector results were affected, he said, by the focus on major projects. Over the past year, there has been a change in the sales and marketing approach that has nearly been completed and it seems to have been a positive factor in the 1st quarter of this year, he added, noting that the company’s wide range of offerings of customer services continues to be expanded. Verint’s growth forecast is similar to that of Nice Systems, one of its major competitors.

Verint’s security-sector business is expected to be weaker this year. Bodner said he doesn’t expect an improvement in the markets in emerging countries in the coming months and predicts that company revenues will decline by 10% to 15% despite growth in the United States and other developed countries. The expectation is that the weakness is temporary, the Verint CEO said, since the need for security intelligence remains strong. Based on past experience, he added, purchases in the emerging markets would have been deferred rather than scrapped altogether, and Verint is well-positioned in those countries.

Lower target price

Technologically, Verint’s products are considered highly advanced, and although it is not thought of as a company that excels in investor relations, Verint seems to be making more of an effort on that score recently. After the analyst conference call, company executives met with several investment banks to give them a more detailed presentation of the company’s operations, its challenges and opportunities. Verint also announced that it would be buying back $150 million worth of its stock in the next two years for the first time in its history. The company is trading at a price-to-sales ratio of 1.9 compared to 3.5 about a year ago.

After the release of Verint’s financial results, there was a wave of downward adjustment of the company’s target price by analysts, although some left their stock recommendation as “outperform.” J.P. Morgan lowered its target price per Verint share from $56 to $43, saying that the company’s decline in revenues was not the result of a loss in market share but advised that investors still exercise some skepticism until company results improved. Deutsche Bank lowered its recommendation to “hold” and lowered its target price from $50 to $35.

Credit Suisse analyst Michael Nemeroff is a skeptic when it comes to Verint and lowered his recommendation to “underperform.” About two weeks ago, he commented to the Bloomberg news service regarding Verint’s civilian sector business, as follows: “They want you to believe it’s an execution problem because execution problems can be fixed,” but he added: “There could be some larger issues in the industry. It may be shrinking faster than anybody suspects.”

Click the alert icon to follow topics:



Automatic approval of subscriber comments.
From $1 for the first month

Already signed up? LOG IN


בנימין נתניהו השקת ספר

Netanyahu’s Israel Is About to Slam the Door on the Diaspora

עדי שטרן

Head of Israel’s Top Art Academy Leads a Quiet Revolution

Charles Lindbergh addressing an America First Committee rally on October 3, 1941.

Ken Burns’ Brilliant ‘The U.S. and the Holocaust’ Has Only One Problem

Skyscrapers in Ramat Gan and Tel Aviv.

Israel May Have Caught the Worst American Disease, New Research Shows

ג'אמיל דקוור

Why the Head of ACLU’s Human Rights Program Has Regrets About Emigrating From Israel


Netanyahu’s Election Win Dealt a Grievous Blow to Judaism