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December 21, 2005

Flush With Cash, NICE Could Be Shopping for M&A Targets

By Robert Liu, TMCnet Executive Editor

NICE Systems is likely shopping around for ideal acquisition candidates now that the Ra’anana, Israel-based provider of public safety/call center and video surveillance solutions has filled up its coffers, one analyst believes.

Last week, NICE Systems completed a secondary stock offering, raising approximately $200 million in cash. And in recent meetings with investors, management has signaled it plans to use its reserves to fund acquisitions to complement its organic growth.

“We were therefore encouraged that a key takeaway from meeting management was that the company is more likely to pursue a series of relatively small acquisition over the next 2-3 years rather than a single large deal,” according to Dan Harverd, analyst at Deutsche Bank.

So who is NICE Systems looking to? Harverd has his theories.

On the call center side of the business, one candidate might be Envision Telephony, which, as Customer Inter@ction Solutions’ Editorial Director Tracey E. Schelmetic highlighted recently, was identified by Deloitte & Touche as one of the fastest growing technology companies of the year.

Another target could be Mercom Systems, which has its strengths in the public safety/first response segment of the call center market. That’s a segment that NICE has targeted as a growth opportunity.

Other possible call center candidates include ASC Telecom of Germany, which last year celebrated 40 years. With over 20,000 installations in 60 different countries, ASC Telecom represents a chance for NICE to grow geographically.

“We do not see a clear rationale for acquiring a company such as VoicePrint or others of similar size as Magnetic North and Wygant, since they would not add much from a technology, market share or geographic perspectice,” the analyst concluded.

On the video surveillance side, NICE already acquired FAST Video Security AG of Switzerland in mid-November for a price of $21 million in cash but earn-outs based on performance milestones could push that price tag by $12 million payable over three years. That said, the market still remains highly fragmented and only in the early stages of consolidation.

Verint Systems competes directly with NICE Systems but goes against management’s stated intentions of an M&A strategy as it is comparable in size with over $1 billion in market capitalization. Other publicly traded acquisition candidates include Axis Communications of Sweden and March Networks. Object Video and Visiowave were also highlighted among a list of possible targets.

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Robert Liu is Executive Editor at TMCnet. Previously, he was Executive Editor at Jupitermedia and has also written for CNN, A&E, Dow Jones and Bloomberg. For more articles, please visit Robert Liu's columnist page.

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