Amdocs Remains Neutral

We reiterate our long-term Neutral recommendation on Amdocs Ltd. ( DOX - Analyst Report ) . The company reported mixed financial results for the second quarter of fiscal 2013.

Why Keeping at Neutral?

Amdocs is performing well in the emerging markets of Asia and Latin America while facing a tough environment in Europe due to macroeconomic headwind. Amdocs’ sales opportunity in North America is more visible after the business with AT&T Inc. ( T - Analyst Report ) gained stabilization.

In the reported quarter, the company achieved key production milestones in the modernization of United States Cellular Corp. ( USM - Analyst Report ) and the Netherlands division of Vodafone Group plc. ( VOD - Analyst Report ) .

Amdocs offers a portfolio of industry-leading technology integration products of managed services for large transformational projects. We believe that the long-term fundamentals of the company remain intriguing due to the transition of the telecom industry to converged IP solutions. Further, the company has a healthy balance sheet.

Amdocs recently launched its state-of-the-art CES 9 product suite. CES 9 is the industry leading fully-integrated platform of BSS, OSS and Network control. This platform will enable multi-channel customer care and real time full integration of devices and network across video, wireless, fixed-mobile converged and high-speed broadband Internet services.

Nevertheless, Amdocs is exposed to the global economic downturn, particularly those events that affect the telecommunications industry. The macroeconomic scenario is yet to recover completely. In addition, delay in business transformation on the part of the carriers may reduce capital spending.

Economic and political uncertainty in Europe may jeopardize the company’s financials, going forward. Furthermore, as the company is operating globally, it is also exposed to foreign currency exchange rate risk. In the last quarter, the company was negatively affected by $2 million of foreign exchange fluctuations. Furthermore,the recent consolidation trend in the U.S. telecom industry may act as a major concern for Amdocs.