The following discussion and analysis of our financial condition and results of operations should be read together with the audited consolidated financial statements and related notes included in Item 15 of our Annual Report on Form 10-K for the fiscal year ended January 31, 2012 (or the 2011 Form 10-K) and the condensed consolidated financial statements and related notes included in this Quarterly Report. This discussion and analysis contains forward-looking statements based on current expectations relating to future events and our future financial performance that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many factors, including those set forth under "Forward-Looking Statements" on page i of this Quarterly Report. Percentages and amounts within this section may not calculate precisely due to rounding differences.
OVERVIEW
Corporate Structure
CTI is a holding company that, subsequent to the Share Distribution (as defined below) that occurred on October 31, 2012, conducts business through its majority-owned subsidiary, Verint Systems. Prior to the Share Distribution, CTI also conducted business through its wholly-owned subsidiary, Comverse, Inc. (together with its subsidiaries, "Comverse"), and prior to the completion of the Starhome Disposition (as defined below) on October 19, 2012, through its majority-owned subsidiary Starhome as well. Comverse's and Starhome's assets and liabilities and results of operations are included in discontinued operations. See note 12 to the condensed consolidated financial statements included in this Quarterly Report.
As a result of the Comverse Share Distribution and the Starhome Disposition, we have one reportable segment, Verint, comprised of Verint Systems Inc. and its subsidiaries. The results of operations of all of CTI's holding company operations are included in the column captioned "All Other" as part of our business segment presentation. As a result of the Share Distribution, we no longer present the reportable segments Comverse BSS and Comverse VAS and Comverse's operations previously included in "All other" have been removed therefrom as Comverse's results of operations are included in discontinued operations for the three and nine months ended October 31, 2012 and 2011. In addition, on August 1, 2012, CTI entered into the Starhome Share Purchase Agreement with unaffiliated purchasers, and accordingly, Starhome's results of operations, which previously were included in "All Other," are included in discontinued operations for the three and nine months ended October 31, 2012 and 2011.
Verint
Overview
Verint is a global leader in Actionable Intelligence solutions and value-added services. Verint's solutions enable organizations of all sizes to make more timely and effective decisions to improve enterprise performance and enhance safety. More than 10,000 organizations in over 150 countries-including more than 85% of the Fortune 100-use Verint's Actionable Intelligence solutions to capture, distill, and analyze complex and underused information sources, such as voice, video and unstructured text.
In the enterprise intelligence market, Verint's workforce optimization and voice of the customer solutions help organizations enhance the customer service experience, increase customer loyalty, enhance products and services, reduce operating costs, and drive revenue. In the security intelligence market, Verint's communications and cyber intelligence, video and situation intelligence and public safety solutions help government and commercial organizations in their efforts to protect people and property and neutralize terrorism and crime. As of November 15, 2012, CTI held 40.6% of the outstanding shares of Verint Systems' common stock and 100% of the outstanding shares of Series A Convertible Perpetual Preferred Stock, par value $0.001 per share, of Verint Systems (or the preferred stock), giving CTI aggregate beneficial ownership of 53.5% of Verint Systems' common stock. The common stock of Verint Systems is publicly traded on the NASDAQ stock exchange (NASDAQ Global Market) under the symbol "VRNT" and Verint Systems files separate periodic and current reports with the SEC, which are available on its website, www.verint.com, and on the SEC's website at www.sec.gov.

Comverse
Overview
Comverse is a leading provider of software-based products, systems and related
services that:
•         provide converged, prepaid and postpaid billing and active customer
          management systems (referred to as Business Support Systems or BSS) for
          wireless, wireline and cable network operators delivering a value
          proposition designed to ensure timely and efficient service
          monetization, consistent customer experience, reduced complexity and
          cost, and enable real-time marketing based on all relevant customer
          profile information;


•         enable wireless and wireline (including cable) network-based
          Value-Added Services (or VAS), comprised of two categories-Voice and
          Messaging-that include voicemail, visual voicemail, call completion,
          short messaging service (or SMS) text messaging (or texting),
          multimedia picture and video messaging, and Internet Protocol (or IP)
          communications; and


•         provide wireless users with optimized access to Internet websites,
          content and applications, manage and enforce policy and generate data
          usage and revenue for wireless operators.

Comverse's products and services are used by more than 450 wireless, wireline and cable network communication service providers in more than 125 countries, including the majority of the world's 100 largest wireless network operators. Comverse's products and services are designed to generate voice and data network traffic, increase revenue and customer loyalty, monetize services and improve operational efficiency.
Strategic Transactions
Share Distribution
On October 31, 2012, CTI completed its previously announced spin-off of Comverse as an independent, publicly-traded company, accomplished by means of a pro rata distribution of 100% of Comverse's outstanding common shares to CTI's shareholders (the "Share Distribution"). Following the Share Distribution, CTI no longer holds any of Comverse's outstanding capital stock.
Following the Share Distribution, Comverse and CTI operate independently, and neither has any ownership interest in the other. In order to govern certain ongoing relationships between CTI and Comverse after the Share Distribution and to provide mechanisms for an orderly transition, CTI and Comverse entered into agreements relating to the provision of certain services and setting forth certain rights and obligations between them following the Share Distribution. CTI and Comverse agreed, among other things, to indemnify each other against certain liabilities arising from their respective businesses and the services that will be provided under such agreements. For more information relating to these agreements, see note 12 to the condensed consolidated financial statements included in this Quarterly Report.
As a result of the Share Distribution, the results of operations of Comverse are included in discontinued operations, less applicable income taxes, as a separate component of net income (loss) in our condensed consolidated statements of operations for all periods presented. The assets and liabilities of Comverse are included in discontinued operations as separate components to our condensed consolidated balance sheets as of January 31, 2012. See note 12 to the condensed consolidated financial statements in this Quarterly Report. Merger of Verint and CTI
As a result of our efforts to evaluate and eliminate CTI's holding company structure, on August 12, 2012, CTI entered into an agreement and plan of merger (referred to as the Verint Merger Agreement) with Verint pursuant to which CTI agreed to merge with and into a subsidiary of Verint and become a wholly-owned subsidiary of Verint (referred to as the Verint Merger). Upon completion of the Verint Merger, the separate corporate existence of CTI will cease.
Completion of the Verint Merger is contingent upon several conditions which the parties believe are customary for transactions of this type. In addition, Comverse agreed to indemnify CTI and its affiliates (including Verint after the Verint Merger) for certain matters related to the Share Distribution, the Verint Merger Agreement and Comverse's business, as well as other CTI activities. In the event that the Verint Merger Agreement is terminated as a result of CTI knowingly or deliberately breaching (and such breach remains uncured for 30 days) in any material respect its representations, warranties or covenants under the Verint

Merger Agreement (referred to as a Trigger Event), Verint would have the right to repurchase for cash from CTI a number of shares of Verint preferred stock (or, if necessary, shares of Verint common stock) that would reduce CTI's ownership of Verint voting securities to below a majority of the issued and outstanding voting securities of Verint (referred to as the Verint Call Option). In addition, if a Trigger Event occurs, for a period of 18 months thereafter, CTI would be subject to the Additional Restrictions, which include not being able to nominate more than two directors to Verint's board of directors, being subject to other limitations on the voting of its Verint stock and being prohibited from acquiring any additional shares of Verint stock.
The occurrence of any of these events may have material and adverse consequences to CTI and its shareholders, including the loss of our ability to control the board of directors and the strategic direction of Verint. Based largely on the provisions relating to the Verint Merger Agreement described above, one of CTI's six directors voted against CTI entering into the Verint Merger Agreement and, in order to avoid any such adverse effects, did not recommend that shareholders approve the Share Distribution. Such dissenting director indicated that, based on the completion of the Share Distribution, he is now in favor of the Verint Merger.
Sale of Starhome
On August 1, 2012, CTI, certain other Starhome shareholders and Starhome entered into a Share Purchase Agreement (the "Starhome Share Purchase Agreement") with Fortissimo Capital Fund II (Israel), L.P., Fortissimo Capital Fund III (Israel), L.P. and Fortissimo Capital Fund III (Cayman), L.P. (collectively, "Fortissimo") pursuant to which Fortissimo agreed to purchase all of the outstanding share capital of Starhome (the "Starhome Disposition"). On September 19, 2012, CTI, in order to ensure it could meet the conditions to the Verint Merger, contributed to Comverse its interest in Starhome, including its rights and obligations under the Starhome Share Purchase Agreement. The Starhome Disposition was completed on October 19, 2012.
Under the terms of the Starhome Share Purchase Agreement, Starhome's shareholders received aggregate cash proceeds of approximately $81.3 million, subject to adjustment for fees, transaction expenses and certain taxes. Of this amount, $10.5 million is held in escrow to cover potential post-closing indemnification claims, with $5.5 million being released after 18 months (less any claims made on or prior to such date) and the remainder released after 24 months, in each case, less any claims made on or prior to such dates. Comverse received aggregate net cash consideration (including amounts deposited in escrow at closing) of approximately $37.2 million, after payments that CTI agreed to make to certain other Starhome shareholders of $4.5 million.
For more information, see note 12 to the condensed consolidated financial statements included in this Quarterly Report. Liquidity Forecast at CTI
We currently forecast that available cash and cash equivalents will be sufficient to meet the liquidity needs of CTI for at least the next 12 months. For a more comprehensive discussion of our liquidity forecast, see "-Liquidity and Capital Resources-Financial Condition of CTI-Liquidity Forecast." Segment Performance
We evaluate our business by assessing the performance of our operating segment. CTI's Chief Executive Officer is its chief operating decision maker ("CODM"). The CODM uses segment performance, as defined below, as the primary basis for assessing the financial results of the operating segment and for the allocation of resources. Segment performance, as we define it in accordance with the FASB's guidance relating to segment reporting, is not necessarily comparable to other similarly titled captions of other companies.
Segment performance is computed by management as income (loss) from operations adjusted for the following: (i) stock-based compensation expense;
(ii) amortization of acquisition-related intangibles; (iii) compliance-related professional fees; (iv) strategic evaluation related costs; (v) litigation settlements and related costs; (vi) acquisition-related charges; and
(vii) certain other gains and charges, including changes in the fair value of contingent consideration liabilities associated with business combinations. Compliance-related professional fees relate to fees and expenses recorded in connection with our efforts to (a) complete certain financial statements and audits of such financial statements, (b) become current in our periodic reporting obligations under the federal securities laws, and (c) remediate material weaknesses in internal control over financial reporting. Strategic evaluation related costs include financial advisory, accounting, tax, consulting and legal fees incurred in connection with our evaluation of strategic alternatives, including the proposed Verint Merger. For additional information on how we apply segment performance to evaluate the operating results of our segment for the three and nine months ended October 31, 2012 and 2011, see note 17 to the condensed consolidated financial statements included in this Quarterly Report.

In evaluating Verint segment's performance, management uses segment revenue, which consists of revenue generated by the segment. Certain segment performance adjustments relate to expenses included in the calculation of income (loss) from operations, while, from time to time, certain segment performance adjustments may be presented as adjustments to revenue. In calculating Verint's segment performance for the three and nine months ended October 31, 2012 and 2011, the presentation of segment revenue gives effect to segment revenue adjustments that represent the impact of fair value adjustments required under the FASB's guidance relating to acquired customer support contracts that would have otherwise been recognized as revenue on a stand-alone basis with respect to acquisitions consummated by Verint.

                                     Three Months Ended October 31,            Nine Months Ended October 31,
                                        2012                 2011                2012                 2011
                                                             (Dollars in thousands)
SEGMENT RESULTS
Verint
Segment revenue                  $       202,650       $       204,575     $      617,957       $      576,828
Gross margin                                67.8 %                65.7 %             66.1 %               66.3 %
Income from operations                    16,771                18,282             64,017               58,526
Operating margin                             8.3 %                 8.9 %             10.4 %               10.1 %
Segment performance                       45,972                44,026            128,337              123,927
Segment performance margin                  22.7 %                21.5 %             20.8 %               21.5 %
All Other
Segment revenue                  $             -       $             -     $            -       $            -
Gross margin                                   - %                   - %                - %                  - %
Loss from operations                     (10,058 )             (19,101 )          (34,291 )            (63,728 )
Operating margin                               - %                   - %                - %                  - %
Segment performance                       (6,813 )              (9,214 )          (28,940 )            (29,888 )
Segment performance margin                     - %                   - %                - %                  - %

For a discussion of the results of our segments, see "-Results of Operations."

RESULTS OF OPERATIONS
The following discussion provides an analysis of our condensed consolidated results and the results of operations of each of our segments for the fiscal periods presented. The discussion of our condensed consolidated results relates to the consolidated results of CTI and its subsidiaries. The discussion of the results of operations of each of our segments provides a more detailed analysis of the results of each segment presented. Accordingly, the discussion of our condensed consolidated results should be read in conjunction with the discussions of the results of operations of our segments.
Three and Nine Months Ended October 31, 2012 Compared to Three and Nine Months Ended October 31, 2011
Condensed Consolidated Results

                               Three Months Ended October 31,                Change                Nine Months Ended October 31,              Change
                                  2012                 2011            Amount       Percent          2012                 2011           Amount     Percent
                                                                     (Dollars in thousands, except per share data)
Total revenue              $       201,520       $       199,364     $   2,156        1.1  %   $      610,581       $      570,655     $ 39,926       7.0  %
Income (loss) from
operations                           6,713                  (819 )       7,532     (919.7 )%           29,726               (5,202 )     34,928     671.4  %
Interest income                        130                   387          (257 )    (66.4 )%              392                2,111       (1,719 )   (81.4 )%
Interest expense                    (7,818 )              (7,909 )          91       (1.2 )%          (23,240 )            (24,571 )      1,331      (5.4 )%
Loss on extinguishment of
debt                                     -                     -             -          -                   -               (8,136 )      8,136       N/M
Other (expense) income,
net                                   (130 )              (1,101 )         971      (88.2 )%              577               13,617      (13,040 )   (95.8 )%
Income tax (provision)
benefit                             (5,462 )               4,317        (9,779 )   (226.5 )%          (25,950 )            (19,314 )     (6,636 )    34.4  %
Net loss from continuing
operations                          (6,567 )              (5,125 )      (1,442 )     28.1  %          (18,495 )            (41,495 )     23,000     (55.4 )%
Income (loss) from
discontinued operations,
net of tax                          14,800                47,392       (32,592 )    (68.8 )%          (14,823 )             (5,245 )     (9,578 )   182.6  %
Net income (loss)                    8,233                42,267       (34,034 )    (80.5 )%          (33,318 )            (46,740 )     13,422     (28.7 )%
Less: Net income
attributable to
noncontrolling interest             (4,549 )              (6,577 )       2,028      (30.8 )%          (21,113 )            (16,462 )     (4,651 )    28.3  %
Net income (loss)
attributable to Comverse
Technology, Inc.           $         3,684       $        35,690     $ (32,006 )    (89.7 )%   $      (54,431 )     $      (63,202 )   $  8,771     (13.9 )%
Earnings (loss) per share
attributable to Comverse
Technology, Inc.'s
shareholders:
Basic and diluted earnings
(loss) per share
Continuing operations      $         (0.05 )     $         (0.05 )   $       -                 $        (0.18 )     $        (0.27 )   $   0.09
Discontinued operations    $          0.07       $          0.22     $   (0.15 )               $        (0.07 )     $        (0.04 )   $  (0.03 )

Net income (loss)
attributable to Comverse
Technology, Inc.:
Net loss from continuing
operations                 $       (10,960 )     $       (11,083 )   $     123                 $      (38,442 )     $      (55,932 )   $ 17,490
Income (loss) from
discontinued operations,
net of tax                          14,644                46,773       (32,129 )                      (15,989 )             (7,270 )     (8,719 )
Net income (loss)
attributable to Comverse
Technology, Inc.           $         3,684       $        35,690     $ (32,006 )               $      (54,431 )     $      (63,202 )   $  8,771

Total Revenue
Three Months Ended October 31, 2012 compared to Three Months Ended October 31, 2011. Total revenue was $201.5 million for the three months ended October 31, 2012, an increase of $2.2 million, or 1.1%, compared to the three months ended October 31, 2011. The increase was attributable to increases in revenue at the Verint segment.
Nine Months Ended October 31, 2012 compared to Nine Months Ended October 31, 2011. Total revenue was $610.6 million for the nine months ended October 31, 2012, an increase of $39.9 million, or 7.0%, compared to the nine months ended October 31, 2011. The increase was attributable to increases in revenue at the Verint segment.
Income (Loss) from Operations
Three Months Ended October 31, 2012 compared to Three Months Ended October 31, 2011. Income from operations was $6.7 million for the three months ended October 31, 2012, a change of $7.5 million, compared to loss from operations of $0.8

million for the three months ended October 31, 2011. The change was primarily attributable to a $9.0 million decrease in loss from operations at All Other partially offset by a $1.5 million decrease in income from operations at the Verint segment.
Nine Months Ended October 31, 2012 compared to Nine Months Ended October 31, 2011. Income from operations was $29.7 million for the nine months ended October 31, 2012, a change of $34.9 million, compared to loss from operations of $5.2 million for the nine months ended October 31, 2011. The change was primarily attributable to a $29.4 million decrease in loss from operations at All Other, and a $5.5 million increase in income from operations at the Verint segment. Interest Income
Three Months Ended October 31, 2012 compared to Three Months Ended October 31, 2011. Interest income was $0.1 million for the three months ended October 31, 2012, a decrease of $0.3 million, or 66.4%, compared to the three months ended October 31, 2011.
Nine Months Ended October 31, 2012 compared to Nine Months Ended October 31, 2011. Interest income was $0.4 million for the nine months ended October 31, 2012, a decrease of $1.7 million, or 81.4%, compared to the nine months ended October 31, 2011. The decrease was primarily attributable to lower principal value of auction rate securities (in ARS) investments held by CTI for the nine months ended October 31, 2012 compared to the nine months ended October 31, 2011, due to sales and redemptions.
Interest Expense
Three Months Ended October 31, 2012 compared to Three Months Ended October 31, 2011. Interest expense was $7.8 million for the three months ended October 31, 2012, a decrease of $0.1 million, or 1.2%, compared to the three months ended October 31, 2011.
Nine Months Ended October 31, 2012 compared to Nine Months Ended October 31, 2011. Interest expense was $23.2 million for the nine months ended October 31, 2012, a decrease of $1.3 million, or 5.4%, compared to the nine months ended October 31, 2011. The decrease was primarily attributable to a decrease in interest expense at the Verint segment principally due to a lower interest rate applicable to Verint's borrowings related to the credit agreement entered on April 29, 2011 compared to Verint's prior facility. For additional discussion, see "-Liquidity and Capital Resources-Indebtedness-Verint Credit Facilities." Loss on Extinguishment of Debt
During the nine months ended October 31, 2011, Verint recorded an $8.1 million decrease in connection with the termination of its prior facility. For additional discussion, see "-Liquidity and Capital Resources-Indebtedness-Verint Credit Facilities."
Other (Expense) Income, Net
Three Months Ended October 31, 2012 compared to Three Months Ended October 31, 2011. Other expense, net was $0.1 million for the three months ended October 31, 2012, a decrease of $1.0 million, or 88.2%, compared to the three months ended October 31, 2011. The decrease was primarily attributable to a $2.4 million decrease from Verint's foreign currency losses of $1.2 million for the three months ended October 31, 2011 compared to foreign currency gains of $1.1 million for the three months ended October 31, 2012 primarily due to the weakening of the U.S. dollar against the euro and Singapore dollar during such period. The change was partially offset by a $1.1 million write-off of an indemnification asset in connection with the resolution of an uncertain tax position from a prior-year business combination at the Verint segment.
Nine Months Ended October 31, 2012 compared to Nine Months Ended October 31, 2011. Other income, net was $0.6 million for the nine months ended October 31, 2012, a decrease of $13.0 million, or 95.8%, compared to the nine months ended October 31, 2011. The decrease was primarily attributable to:
• a $7.9 million decrease in realized gains on investments for the nine months ended October 31, 2012 compared to the nine months ended October 31, 2011;

•          $4.9 million of proceeds recorded in the nine months ended October 31,
           2011 in connection with the settlement of certain CTI claims against a
           third party; and


•          a $1.3 million decrease in foreign currency gains primarily due to the
           strengthening of the U.S. dollar against the British pound sterling,
           euro, and Singapore dollar during such period.

These decreases were partially offset by a $1.1 million decrease in loss related to derivative financial instruments (not designated as hedging instruments) at the Verint segment for the nine months ended October 31, 2012 compared to the nine

months ended October 31, 2011 primarily due to weakening of the hedged currencies against the functional currencies, primarily the U.S. dollar against the Singapore dollar.
Income Tax Provision
Three Months Ended October 31, 2012 compared to Three Months Ended October 31, 2011. Income tax provision from continuing operations was $5.5 million for the three months ended October 31, 2012, representing an effective tax rate of
(494.3)%, compared to an income tax benefit from continuing operations of $4.3 million, representing an effective tax rate of 45.7% for the three months ended October 31, 2011. The effective tax rate for the three months ended October 31, . . .