NICE Systems Ltd

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NICE Systems Ltd.

PO Box 690
8 Hapnina Street
Ra'anana,
Israel
Telephone: ( + 972 09) 775 37 77
Fax: ( + 972 09) 743 42 82
Web site: http://www.nice.com

Public Company
Incorporated: 1986
Employees: 154
Sales: $206.35 million (2005)
Stock Exchanges: NASDAQ Tel Aviv
Ticker Symbol: NICE
NAIC: 334210 Telephone Apparatus Manufacturing; 334419 Other Electronic Component Manufacturing; 541512 Computer Systems Design Services; 541513 Computer Facilities Management Services

NICE Systems Ltd. (Nice) is the world's leading developer of interaction analysis and management software and systems. The company's systems providing logging, recording, and analysis of telephone calls, closed-circuit and video surveillance systems, and other media and data communications for call centers, financial trading floors, and command and control centers. The company's products go beyond simple recording and logging to provide real-time voice, emotion, and vocabulary analysis, and are capable of handling multiple and simultaneous communications. Nice holds some 30 percent of the world market for such systems, called Insight from Interactions by the company; in specific markets, such as air traffic control centers, the company's market share has approached 50 percent. Nice's customers include American Express, Citibank, Time Warner, Vodafone, and some 70 other Fortune 100 corporations; other customers include the Federal Aviation Administration, the Bank of England, the New York Fire Department, the European Space Agency, and Parliament House in Canberra, Australia, among other public sector institutions. Altogether, Nice counts more than 24,000 customers worldwide. In support of its international operations, Nice has built a network of subsidiaries in the United States, the United Kingdom, France, Germany, India, Japan, Hong Kong, Australia, and Singapore. Nice is traded on the Tel Aviv Stock Exchange and the NASDAQ and is led by founder and Chairman Benny Levin. In 2005, the company posted sales of $206 million.

ISRAELI INTELLIGENCE SPINOFF
IN 1986

Nice Systems was created in 1986 by a team of engineers led by Benny Levin and including David Arzi, Micky Golan, and others. The group sought to commercialize the logging and recording software they had developed as part of the international operations of the Israeli Defense Forces (IDF). Founded in Ra'anana, Nice Systems initially targeted the international defense markets, developing telecommunications software and systems for both military and government applications. Among the company's early products was its COMINT system which allowed users to detect, locate, monitor, and record radio transmissions. In order to penetrate foreign markets, the company teamed up with TRW, based in the United States, in a development partnership. The company's relationship with TRW was already strong, as Levin had served as project manager for TRW's operations in Israel since the early 1980s.

As part of its international sales effort, Nice formed a partnership with Elta, part of Israel Aircraft Industries, which took over the Ra'anana-based company's sales operations. Nice also formed a second partnership with Elta, creating the joint venture Elnice in order to develop digital communications and electronic information products. In this way, the company quickly gained an international presence; by the end of the decade, the United States represented the largest part of Nice's revenues.

Partnerships also played an important role in the next phase of Nice's development. As the Cold War reached its conclusion at the end of the century, defense-oriented companies were confronted with the inevitability of a shrinking global market. Nice took early steps to broaden its sales base by turning to the civilian sector. In 1989, the company set up a new partnership, with Tekelec, based in the United States, developing a tool for analyzing conversations over a fiber distributed data interface (FDDI). The partnership with Tekelec later resulted in the creation of NiceCom, which began producing devices for the increasingly important data communications market, such as ethernet to ATM switches. By 1993, Nice Systems spun off NiceCom as a new company. The following year, however, Nice decided to sell NiceCom, in large part because the company lacked the resources to market NiceCom at an international level. In 1994, 3Com bought NiceCom, paying more than $58 million.

BREAKTHROUGH IN 1995

By then, Nice had gone public in 1991 on the Tel Aviv Stock Exchange, a move that enabled the company to develop its interests in the civilian sector. The company, which through NiceCom had been one of the pioneers of the high-speed networking market, targeted another highly promising market, that of data and voice communications logging and recording systems. The company's first major success in this market came with the release of NiceLog. Introduced in 1994, NiceLog offered the capability of recording large numbers of simultaneous telephone transmissions. NiceLog not only provided digital recordings of the conversations, it was also able to add time and date stamps, as well as telephone numbers to the logs. In this way, companies' recorded telephone archives became more easily searchable than ever before. NiceLog proved a breakthrough product for the company. In 1995, the company had received its first large-scale civilian contract, for $30 million from the Federal Aviation Administration (FAA) in order to install NiceLog in a number of U.S. airports. The adoption of NiceLog by the FAA attracted the attention, and confidence, of the global community, and orders began to pour in for the system.

Nice further enhanced its international profile when, in 1996, it added its stock listing to the NASDAQ. The company then began developing a number of distribution partnerships, including agreements with both Lucent and Siemens in 1997. Also that year, Nice acquired Dees Communications for $20 million. The purchase of Dees helped strengthen Nice's operations in call center quality control and the monitoring of employee productivity.

Nice made a number of other significant acquisitions through the end of the 1990s. In 1998, the company acquired International Blue Software Co., paying $6 million for its expertise in remote monitoring and employee training. In 1999, the company paid another $6 million to acquire STS Software Systems, gaining VoIP capability for its growing position in the call center market.

The following year, Nice grew again, buying Center-Point Solutions, a specialist in digital recording, statistical tracking, and call center monitoring. That $16 million purchase was shortly followed by the $19 million acquisition of Stevens Communications, which provided customer experience management services.

In the meantime, Nice Systems continued rolling out groundbreaking products. These included NiceCall, launched in 1997 as an upgraded version of NiceLog for the public safety sector. The company also debuted its Faxlogger product, which was cable of coordinating and archiving all fax transmissions within an organization. That product, however, seemed to be somewhat ahead of its time, and struggled to find a market. In the meantime, however, Nice achieved new success with its launch of NiceVision, the industry's first digital video recording system.

COMPANY PERSPECTIVES

We create the energy that powers our day, our solutions and our customers around the world.

Nice's largest acquisition came in 2002, when it agreed to acquire Thales Contact Solutions, a move that helped Nice gain a significant presence in the European market. The company paid $55 million for that acquisition, which helped it reduce its reliance on the U.S. market, down to just 50 percent of total group sales in 2004. Also in 2002, the company reached a new important partnership agreement, with Motorola. Under that agreement, Nice began supplying its digital recording solutions services to Motorola system users in the public safety, government and police, and fire and rescue sectors.

CIVILIAN FOCUS IN THE NEW
CENTURY

The success of Nice's civilian-sector product line encouraged the company to exit the defense market in the early 2000s. That move was completed in 2003, when Nice divested its COMINT system and other military-specific operations. A major factor behind the company's defense exit was the success of its increasingly sophisticated product line. As an example, in 2002, the company launched a new product, called Call2Action. This system enabled call center operators and others not merely to record customer calls, but also to analyze their target, allowing companies to respond quickly to specific customer requests.

Call2Action became part of the company's growing quality monitoring solutions packet, called NiceUniverse. The company's universe soon expanded again, notably with the launch of NiceFeedback in 2003. This product provided customers with applications for collecting and analyzing customer feedback in order to raise customer satisfaction levels.

Nice took its technology to the next level in 2004, when it released its latest product, Nice Perform. The new program was capable of tracking a large number of variables in a customer's call (vocabulary, tone of voice, and emotional condition, among others), allowing call centers to respond quickly to frustrated and angry customers, but also to identify callers with potentially fraudulent intentions.

Nice returned to the acquisition table in 2005. The company bought up its top Australian distributor, Hannamax Hi-Tech, giving Nice a stronger foothold in the Australian and New Zealand markets. Also in 2005, Nice Systems bought out one of its major competitors, paying $38.5 million to acquire Dictaphone Communications Recording Systems. That purchase provided a significant boost for the company's client base, while also providing new markets for its sophisticated multimedia analysis technology.

Moving into 2006, Nice bought full control of Switzerland-based Fast Video Security AG. That purchase helped boost the company presence in the monitoring of closed-circuit television security systems, enabling the simultaneous and automatic analysis of multiple video screens.

Nice showed no signs of slowing down. In June 2006, the company announced that it had completed two additional acquisitions. The first of these was the $200 million purchase of IEX, a subsidiary of Tekelec, which provided contact center workforce management solutions. The second, Performix, added a focus on contact center performance management, at a cost of $13 million. Both acquisitions marked a significant step in Nice Systems' effort to provide turnkey contact center management and analysis solutions. With the global market for such systems expected to grow strongly over the next decade, Nice Systems' future appeared nice indeed.

M. L. Cohen

PRINCIPAL SUBSIDIARIES

NICE APAC Ltd. (Hong Kong); NICE CTI Systems UK Ltd.; NICE Japan Ltd.; NICE Switzerland AG; NICE Systems (Singapore) Pte. Ltd.; NICE Systems Australia Pty Ltd.; NICE Systems GmbH (Germany); NICE Systems Inc. (U.S.A.).

KEY DATES

1986:: NICE Systems (Nice) is founded by a team of former Israeli intelligence engineers to produce logging and recording software and systems.
1989:: Nice begins developing first systems for civilian sector.
1991:: Company completes public offering on Tel Aviv Stock Exchange.
1993:: High-speed data transmission operations are spun off into NiceCom (sold to 3Com in 1994); launch of NiceLog.
1995:: Company lands breakthrough contract to supply NiceLog to FAA.
1996:: Company lists on the NASDAQ.
2003:: Company exits defense sector.
2005:: Nice acquires rival Dictaphone Communications.
2006:: Nice acquires IEX for $200 million.

PRINCIPAL COMPETITORS

Galtronics Ltd.; Elbit Systems Ltd.; Elta Electronics Industries Ltd.; Siemens Israel Ltd.; Electra Ltd; Vishay Israel Ltd.; El-Op Electro-Optics Industries Ltd.; Elisra Group; Baran Group Ltd.; Rad Data Communications Ltd.