Good day everyone and welcome to this Amdocs' Second Quarter 2006 Earnings Release Conference Call. Today’s call is being recorded and webcast. At this time, I would like to turn the call over to Mr. Tom O'Brien. Please go ahead sir.

Thanks Jennifer. I'm Tom O'Brien, Vice President of Investor Relations for Amdocs. Before we begin, I would like to point out that during this call, we will discuss certain financial information that is not prepared in accordance with GAAP. The Company's management uses this financial information in its internal analysis in order to exclude the effect of acquisitions and other significant items that may have a disproportionate effect in a particular period. Accordingly, management believes that isolating the effects of such events enables management and investors to consistently analyze the critical components and results of operations of the Company's business and to have a meaningful comparison to prior periods. Also, this call includes information that constitutes forward-looking statements. Although, we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be obtained or that any deviations will not be material. Such statements involve risks and uncertainties that may cause future results to differ from those anticipated. These risks include but are not limited to; the effects of general economic conditions and such other risk as discussed in our earnings release today and at a greater length in the Company's filings with the Securities and Exchange Commission including in our annual report on Form 20-F filed on December 28, 2005. Amdocs may elect to update these forward-looking statements at some point in the future. However, the Company specifically disclaims any obligation to do so. Participating in the call today are Dov Baharav, President and Chief Executive Officer of Amdocs Major Limited; Eli Gelman, Executive Vice President; and Ron Moskovitz, Chief Financial Officer. Following Dov and Ron's comments, we’ll open the call to Q&A. Now, let me turn the call over to Dov Baharav.

Thank you Mr. O'Brien. Good afternoon ladies and gentlemen. The momentum that we had in the first quarter has continued in the second quarter. Revenue grew 23% and earnings per share, excluding certain items grew 26%. We extended our strategic relationship with Sprint Nextel this quarter and have an important M&A activity as well. We remain confident that our strategy and market position will lead to continued success in 2006 and beyond. Even as we recognize the very main considerable challenges. Market range remains favorable for Amdocs. Industry consolidation and transformation continues and competition amongst service providers is intense. Carriers are increasing their capital spending, creating networks which are becoming faster and cheaper, allowing for new digital services to be launched. At the 3GSM Wireless Conference in Barcelona in February, the focus was on content naturally for mobile devices. Mobile content is a $15 billion market now, which could grow to nearly 70 billion in 2009. Service providers must have systems that enhance their interaction with their customer and support the rapid introduction of new services. This requires an integrated customer management, or ICM strategy, and systems that can support the full customer lifecycle. We, Amdocs, are winning deals because we are uniquely positioned to enable service providers to rapidly introduce new offering, lower total cost of ownership, and focus on their customers. The demand for ICM and our ability to address this demand continues to drive our growth in 2006 and beyond. In the current quarter, we had 11 key wins. We disclosed a few details about some of them in our press release today. In addition to Sprint Nextel we had other wins across line of business, product, services and geographies. As announced on Monday, VimpelCom and its affiliates in the CIS chose Amdocs as the platform to…

Thank you Dov. Our second quarter revenue was $601.1 million, representing growth of 23%. Our EPS excluding acquisition related cost and equity based compensation expense, net of related tax effects, was up 26% to $0.44 per diluted share. GAAP EPS was $0.38 per diluted share. I'll spend a minute now on a few P&L items. Please note, that I'm referring to the results excluding acquisition related items and equity compensation expense. Operating margins were 17.7% this quarter, up from 17.3% last quarter. The main drivers of the increase were leverage from higher revenue and reduced spending on the R&D and SG&A lines, offset by lower gross margins on services as we ramp up projects including Sprint Nextel. As we said when we won the Sprint deal, this project will put pressure on our margins until we convert subs onto our system. Gross margin should be comparable next quarter. We expect operating margins to grow to around 18% in the third quarter and slightly higher in the fourth quarter. Other income was up this quarter due to higher interest rates on our investments as well as higher cash balance. Our effective tax rate in Q2 was 18%, the same as last quarter. We may see some fluctuations in the quarterly tax rate this year, but we are using an 18% rate in our annual guidance. Free cash flow was strong at $86 million. Included in this number was $13 million in CapEx. We expect CapEx in the next few quarters to increase, primarily due to investments related to the Sprint Nextel project. The timing of these expenditures is not finalized yet, but we could be looking at between $30 million to $40 million per quarter in Q3 and Q4. DSO at the end of the quarter was 53 days, the same…

Thank you Ron. This was a very good quarter for Amdocs and we are excited about the opportunities that we see. With that, let me now open the call to Q&A.

Hi guys, this Gordon Hodge, I was actually calling in for Tom Roderick. I had a quick question about the Sprint deal. I want to know when the Sprint migration would begin and how investors should think about the pace of that migration?

Well, the Sprint, when we announced the Sprint Nextel deal, it was mentioned that it is expected to be completed by the end of 2007. And we started embarking on this project immediately. And I would assume that it will be done from now until the end of 2007.

Great. And also, could you maybe elaborate on any kind of progress you're seeing in the cable market?

The cable market is one of the areas that we feel very encouraged given the progress that we have. We see the effectiveness to our suite of products. As we mentioned in the press release and actually the sweep, we had two wins. One, extension of a contract and one CRM contract. So, we see I would say, more receptiveness to Amdocs in this area, on one hand. And secondly, a big opportunity moving forward once we start implementing our Amdocs 7, which is the suite, Amdocs standard suite that would include all the cable functionality as it will be released at the end of this year, the beginning of next year.

Great, thanks guys, good quarter.

Thank you.

We’ll go next to Sterling Auty with JP Morgan.

Thanks. I wondered if you could give us a little bit more color on the margin picture? You talked about gross margins for next quarter. Where do you see it gross margins going beyond that? I mean, do they remain flat and eventually come back up? Or can they depress further? And just a little bit more color on the expense management that's going to provide the operating margin expansion over the next couple quarters.

As for the gross margin, as we said in the call, we expect gross margin to be at comparable levels in the next couple of quarters. And we should see expansion in the margin resulting mainly from the leverage that we see on the operating expenses. If we get more into the details, we may see some maybe slight increase in the gross margin of the services. And we may see further an improvement in the gross margin of services, as we start converting the Sprint subscribers into our systems and encountering improvement in the gross margin.

Okay. And then one follow-up would be on the backlog. Any sense -- can you give us any color as to what the Sprint opportunity may have contributed to backlog in the quarter? So we can get a feel for what the rest of the business is doing from a backlog perspective.

The backlog grew this quarter, I would say, because we had very nice wins. And what I can say is that we may see additional contribution from the Sprint deal. And as we move along with the subscribers a conversion. And we are going to see the full impact only when we end fiscal 2007.

Okay, thank you.

Thank you.

Hi. I would like to understand some of the accounting going on with this Sprint contract. It sounds like, if I heard you correctly, you're going to have $30 million to $40 million of CapEx in the next two quarters. Are you getting any up-front prepayments from the customer to fund any of that or should we see a pretty big depression of free cash flow relative to your net income over the next two quarters, before the subscribers start to roll on?

I cannot give specifics of the payments on this contract. But we expect to see some pressure on the cash flow, the free cash flow, but still we expect some, I would say, decent levels of free cash for the coming quarters.

And was it $30 million to $40 million of CapEx per quarter for the next two quarters?

I'm sorry, could you repeat that?

What was the CapEx level that you mentioned? I thought I heard you say $30 million to $40 million of CapEx per quarter.

Yes, yes.

Okay. That's substantially about the 15 million you have been posting for the last two.

Yes.

Okay. And then just on the overall demands that you're seeing, 11 deals signed in the quarter is a bit above the kind of eight to nine run rate that we’ve seen for the last few. Is that a sustainable level? Was this a particularly good signing quarter? And how can you just talk to the demand picture for the next few quarters out?

Liz, I would say that first of all this quarter was a very strong quarter in terms of sales, one of the strongest. And in terms of the pipeline and the demand we see very strong and diverse demand from all different angles, the different products, CRM and billing and mediation, A&M, yellow pages, managed services and others. And in terms of the rates, we are working hard to execute our strategy and we sign them as soon as we can.

And then, Ron, just a conversion of the new sales actually into the backlog, is there a few quarter delay as you go through the planning process where the revenue of new sales might not actually impact the backlog until a few quarters out?

Usually, what impacts the backlog is the 12 month portion of the win. So if we have for instance, the win of a Sprint Nextel, what you see in the backlog is a recognition of the next 12 months. So, if you expect a growth in the run rate of the revenue following the conversion of the subscribers to our system, we may see additional contribution to the backlog during 2007. And Liz, in some cases we win some license and some basic package of software services and usually after a few months when the scope of the project is fully defined and the customer makes up his mind; then they grant us additional services and then you see some additions to the backlog.

Okay, thank you guys.

Thank you, Liz.

We’ll take our next question from Michael Turits at Prudential.

Hi everybody, how are you today?

Good, very good.

A couple of questions. First on the margins, the previous guidance had been for margins to stay flat over the next couple of quarters, which seems like an accomplishment to begin with just given the rollout on Sprint. But what's changed now that now you think you can get margin expansion?

I would say that first of all the sales that we were able to improve the margins. Then I would say stronger execution as well as business.

Can't be more specific than that?

More revenue and less expenses, that's the idea here.

All right. Now, on the CapEx side, 30 million to 40 million for third quarter and fourth quarter, I think a lot of people had expectations that there would be some kind of cash non-income statement out late for Sprint. Is that pretty much the extent of the abnormal level just third and fourth quarter? Or should we expect that level to continue into the following year?

I cannot give you the specifics of 2007 but we may see a tail of it in the beginning of '07.

And then last question also, on the backlog issue, there was nice growth sequentially this quarter in backlog. Is there any reason to think of the backlog as having any particular accelerators or decelerators in the next couple of quarters? Is there anything that rolls in a delayed way, I think Liz asked this question, or is this kind of a typical run rate in terms of growth that we should expect?

When we do our planning and focusing, we see growth in the coming quarters. And next quarter is we see sequential growth of 3.5%, the following quarter if you look, they implied the number from our annual guidance, we should see maybe similar growth. And we expect growth moving on to 2007 as well. And not necessarily, it is -- we're talking about growth in revenue in the topline. And then its not necessarily reflected in the backlog on a quarterly basis. So, there are some things -- some business that we win and recognize during the quarter, not everything is flowing through the backlog.

Mike, let me add that that our position in the market -- effectively, the market is going through transformation and consolidation. And the activities that we have with the major customers in North America: AT&T, Sprint, Cingular, and the wins that we have in Russia and other activity; we see a substantial -- we see a trend of growth in all the activity, which was translated to a number of wins, translated to growth in the backlog. And as we said, we feel that we will continue to see growth in 2006 moving forward. And we believe that our ability to execute on our strategy regarding M&A, moving toward the content, regarding spending the activity in advertising and media. And executing on the integrated customer management. All that will create, I would say, create the growth moving forward. And on top of it we will try to improve the margins by saving expenses and move more resources to India on one hand, and become more effective and efficient. And that will help us to improve the margins, moving forward.

Okay, thanks Dov, thanks Ron.

Thank you, Michael.

Thank you, hi, good afternoon guys. Two quick questions for me. The VimpelCom contract you announced back on Monday, is that a converged billing contract? And have you been displacing anyone or is that a fresh new contracts? Because I think you have some relations with the VimpelCom people.

This is a significant extension of the relation with VimpelCom. We have been working with VimpelCom in Russia. It's no new deal. Not necessarily replacing, it's expansion into the Commonwealth and independent countries. It's significant business for us.

Thank you. And I think, Ron, if my calculation is correct, you guys have departed from about close to 200 people throughout the quarter. Is that right?

Not necessarily.

Not necessarily. All right. Thank you very much.

Thank you, Shaul.

Thank you very much, Shaul.

We will take our next question from Marianne Wolk at Susquehanna.

Thanks. I had a couple of questions. First, on the Sprint business, we had assumed given the size of the subscriber base and a lot of the integration work that was possible that you would do a much more sizable piece of business with Sprint in ‘07 than ‘06. Can you confirm that in anyway? And then secondly, have you seen any increase in activity yet due to the consolidation of SBC, AT&T and now Cingular? Thanks.

Marianne, we indicated that we will see an increase at the level of activity with Sprint mainly due to the conversion of subscribers to our system. And so that will be the main driver. Regarding services and additional activity, I would say we cannot comment on it at this point. The main goals would be due to conversion of subscribers. Regarding your second question to AT&T, we are excited about the opportunity. We have excellent relationship with AT&T. We believe that our platform, that is the basis for Lightspeed, which will be the main platform for the mass market of AT&T. And our other activity with AT&T will might be used as a very important asset for AT&T. Our services can be used to help them to convert and converge and integrate the activity with the classic AT&T. And we hope that in the future we will be able to help them in consolidating their sales.

And just one last item, can you tell us the contribution of DST in the quarter?

It was $59 million growth from $57 of last quarter. And as we mentioned, we had two important wins in cable actually in broadband this quarter. And we're very pleased with the progress that we have made on this front.

Thanks very much.

Thank you.

Thank you, Marianne.

We’ll go next to Julian Bu at Lehman Brothers.

Congrats on the quarter.

Thank you, Julian.

I apologize if I'm going back to the backlog question. Ron, of the $40 million increase in backlog, can you quantify how much of that was due to Sprint?

As we said earlier, we cannot quantify exactly what the impact of Sprint on this backlog, but as I said earlier, what is included is the run rate for the next 12 months. And we expect that to grow moving forward.

Okay. What about Cingular, did Cingular have a big impact on the backlog increase this quarter?

No. And we didn't talk specifically about any win in Cingular this quarter. And it is not one of the reasons for this growth in backlog.

Okay. So the way to understand this increase is, you got 11 key wins, in aggregate they added to the backlog increases, is that the right way to look at it?

Yes, and growth in the existing businesses.

Okay. Can I ask you, into Sprint, the actual conversion, when do you expect that to happen?

As we indicated the plan is to complete the conversion by the end of 2007. We started full steam ahead to execute on this plan. And we hope that between now and 2007 we will be able to complete all the conversion.

So, it sounds like their preparation work is a lot to get done, you are pretty much ready to convert the subs now?

Well, we did not say that we are ready to convert, we just say that we embarked. And the work that we are doing in Sprint Nextel is not only conversions. So, we are progressing in all fronts of this project according to the plan.

Okay.

I think Sprint indicated that they would start converting later on this year. And we'll finish the conversion by the end of '07.

Conversion is not being done in a fresh calc so there is work in the - from now until the end of 2007 there's a lot of work to be done.

Okay. My last question, last year you grew earnings by over 20%. This year looks like you are projecting again over 20%, well over 20%. What's the long-term model of your business? I guess should we be expecting over 20% growth each year?

We don't give guidance for 2007 or longer term. But we expect to grow a topline between – organically between 10% to 15% and to accelerate the earning growth further than that. So, I cannot tell you that any specific year or in any year we are going to grow any less or more than 20%. But we are going to provide accelerated earning growth compared to the revenue growth.

Okay, thanks a lot.

Okay. Your next question from Ashwin Shirvaikar at Citigroup.

Hi, thanks for taking the question. Just sort of a step back and take a strategic look at the question. This quarter you guys signed a letter of intent with Cramer to cooperate on OSS. And then you guys went on to acquire Qpass and their digital commerce suite. So, given your past statements about M&A in the OSS space, I might actually expect the opposite course of action. How should I think of that, are you stepping away from future investment in OSS, defer to partner? And won't you will be more focused in higher growth areas like digital commerce and content? Is that the right way to think of it?

Ashwin, thank you for the question. Not quite, we didn't give up on any front. That we have always said that we are trying entirely in different directions. Qpass was the most important and urgent thing for us to do in terms of getting quickly into the fast growing space of digital commerce and digital content. It's a fabulous asset and we saw that this asset is better off as part of Amdocs than as a standalone company. And that's why we execute this transaction. We have relation with Cramer for quite some time. We articulated and formalized this relationship through an alliance agreement. But we remain active and in different areas including OSS.

Okay. Just heading back to Sprint Nextel. From an accounting perspective, are there multiple parts such as the deployment piece that has a specified milestone and then a conversion, and then you run it? Are there multiple pieces, any milestones we should look for?

From accounting standpoint, we recognize the revenue on a per sub basis. So, its not multiple elements that are going to be recognized separately.

So, until you actually start converting, does that mean that there is -- isn't there a revenue component that you have to, that you might recognize while you develop the system?

Most of the revenue is going to be recognized on a per sub as long as we convert the subscribers. We might see some services that are going to be on top of that, which are not necessarily part of the original contract.

I see. Okay. Last question, clarification on the share count. In the past two quarters, was the guidance based on 225 million and now it's on 220?

220 for the year, for the entire year. For the next quarter, it's at 222.

Okay. Thanks, great quarter.

Thank you very much Ashwin.

And we will go next to Thomas Ernst at Deutsche Bank.

This is actually George Aborian (phonetic) calling behalf of Tom. Great quarter guys.

Thank you.

Thank you.

One quick question and a follow-up on the VimpelCom win. Was the VimpelCom already included in your guidance the last time you provided guidance? And also related to that, is that, VimpelCom is also in the backlog number you provided today?

VimpelCom is an existing customer of Amdocs. So we have revenue on an ongoing basis of VimpelCom. What we announced this week is additional business with the VimpelCom subsidiaries in the CIS countries. And this is actually added to some extent -- the next 12 month portion of the business is added to the backlog.

Okay. But was that thing already considered when you provided guidance last time, or this is something different?

No, this is addition.

Okay, thank you. And just one follow-up question on the Qpass acquisition. Are we supposed to expect that you will add some of that new functionality to Amdocs Enabler 7? Or that would be done probably at a later stage, are you going to delay that product at all?

Well, most of the components that we need to support content for the carriers exist today with the Qpass assets. We will make some adjustment in Amdocs 7 to better integrate the two lines of products. But in terms of the content delivery platform facility and the service management part, which are the two major components, they exist and these are very good products that we are acquiring through the Qpass acquisition.

Okay, thank you very much. Congratulations on the quarter.

And we will go next to Daniel Meron at RBC Capital Markets.

Hi guys. Congrats on very good quarter and outlook. Just on the side of the competition, Dov you mentioned that you see heating up. Anybody that we're missing aside from Converse and Oracle that just acquired Portal? Were those the ones that you referred to as TDM competition?

Daniel, we have a set of competitors from different angles. Maybe the newest ones are the one that you mentioned. But the older ones, some of them remains to be there on different fronts. The cable and satellite front, and on the CRM front, some of their size are competing with us. So, we think we are doing quite well against competition. But by no means we are not complacent, and the fact there is new competition out there means that we just need to keep on executing on our strategy as we have done so far. As you know, we have been very successful competing with Portal in the past and the same with Siebel on a standalone basis. And we believe that the breadth of our products and services, the business knowledge that we have on telecom, the tier one install base and many other reasons make us feel that we can compete with a new competition as well.

Great, thanks Eli. And another question from me on M&A side. Obviously, you did a couple of deals over the last 12 months. What else do you think is missing in your product portfolio, strategy portfolio, where else would you be looking? You mentioned OSS. Any other areas that you may go into, financial services or anything like that?

Daniel, as a matter of fact we said all along that we don't have everything. OSS is definitely one front, the service component as well as in some other areas. We may want to expand some of our capabilities on the services side in terms of size or penetration into geographies. We did not necessarily complete everything we wanted to do about content. And then there is the SLE, or service level execution environment area that may help us with faster provisioning of services and the list is quite long. So I would say, we would keep on be active on this front. We said all along and we still support the same statement that we will use the cash that we are producing for growing the Company and investing into growth engines. And we are very encouraged that the post merger integration of those transactions that we've done in the past are highly successful. And we keep on, we will keep on execute upon our strategy also through M&A.

Great, thanks Eli. Having the net cash close to $9 million always helps. Any update on the balance of the buyback that you have out there?

We don't have any authorization at this point and as Eli alluded for a M&A remains our top priority at this point.

Great, thank you, Ron. Good luck going forward as well.

Thank you Daniel.

Thank you Daniel.

We will take our next question from Julie Santoriello at Morgan Stanley.

Thanks, good afternoon. A question on the wins in the quarter. Can you help me just understand the very strong pace of wins that you had in the March quarter, reconciling that with the fact that you're not raising the revenue guidance really meaningfully for this fiscal year? Is it just that on those new wins you expect the revenue to ramp more meaningfully in fiscal '07?

First of all we increased the guidance for the year and for the third and the fourth quarter. And obviously, some of it is going to impact 2007 as well.

Okay. Would we expect that if the bulk of the conversions for Sprint don't happen until the calendar fourth quarter, that the contribution to Sprint, I'm sorry contribution to backlog from Sprint is more weighted to the second half of that 12 month period?

What we said is that, and what Sprint's referred to is that the conversion is planned to end by the end of 2007. Now, with the pace that was not discussed, I assume that June 2007 we are going to see greater contributions to the backlog. I cannot give more details regarding that.

Okay. And just a question on the pipeline. I believe there has been several opportunities in Europe in the pipeline for some time. Are you seeing those get to maturity and possibly getting close to near-term wins?

Julie, we see opportunities in Europe, Western Europe as well as what used to be Eastern Europe. Some of them we are closing as we move forward. Some of them remains there. But I would say that the most important thing for us is that the pipeline is diverse around across all line of business and across all type of services and also in terms of geography. So, I cannot comment about specific bid, just speaking out or bids that we are speaking about in Europe.

I can just mention that out of the wins that we referred to this quarter, maybe half of it is in Europe. So, we have very nice win a closer ratio in Europe and we see a very nice pipeline going forward.

Okay, thanks. And can you comment on the pipeline in IP TV, might we see another carrier look at Amdocs solution in the next couple of months or quarters?

The only thing that we can comment is we have quite a lot of activity there. But no, we cannot comment about other specifics.

Okay, thank you.

Thank you Julie.

Thank you Julie.

And we will take our next question from Ben Abramovitz at Icap Equity Research.

Good evening guys. I just have a quick clarification on the accounting treatment. In terms of, I think a few people have asked in terms of the margins how the improvement comes on the operating margin despite a slight decrease on the gross margin going forward. If I understand the accounting, as you tend to move people towards more project specific, some of the costs that were being recognized in SG&A and R&D basically get bumped up to the gross margin side. I guess, in this case, how much of that move, in terms that we saw about a 5 million decline in SG&A, about 1 million change down in R&D; is basically just bumped, basically the same personnel. But in terms of recognizing those costs, now have to go above to the gross in terms of the gross line?

I would say, some of the reduction in the operating expenses move to a, some project activity. But most of the reduction in mainly in the SG&A was the result of some sales cost that we had in the previous quarter. If you compare the selling costs, SG&A, to the September quarter we see even slight increase.

Would you say it's only a small fraction from the SG&A that actually bumped up to the cost of service line?

Yes. We in general we are a successful in increasing the revenue and keeping the operating expenses at a fixed level or even not going at the same pace. And that was actually creating some leverage to the operating margin.

Now, not all the cost is equity related.

Okay. But you said there was no material change in terms of the actual number of employees.

No. But, let me give you an example. We see some reduction over the last couple of quarters in R&D. Most of the reduction is because we use less expensive resources in different jurisdictions. And we actually released some very costly subcontractors in other areas. So basically we produce more value of R&D with less amount of money.

Okay. Thank you guys.

Thank you very much.

And there are no further questions, so I'll turn the conference back over to the Company for additional or closing remarks.

Okay, thank you. And thank you to everyone on the call. We appreciate you joining us this afternoon. This concludes the call.

And again this does conclude today's conference. We thank you for your participation, you may disconnect at this time.