The Market Is Wrong, These Results Were Nice Systems Ltd (ADR) (NICE)

Of course this won’t go on forever. At some point the bookings will drop into revenues, and they should increase at a similar run rate going forward (when bookings growth naturally slows). The trend of increasing analytics sales will carry on not least because Nice signed a deal with International Business Machines Corp. (NYSE:IBM) in order to incorporate its analytics solutions within its service applications. This is a great way for IBM to get a channel into Nice’s strong presence within the Financial vertical. Indeed, Nice booked a major customer interaction deal in Q4 and signed a follow up deal with a large US bank with a compliance based solution.

Nice Systems Earnings Drivers

If, as I do, you think that financials are being increasingly regulated and fined over compliance and customer interaction issues then Nice is set for a strong period of growth. As customer interactions increase across multi-platforms and the threat of fraud (external and internal) rises, there is an increasing need for solutions that log and monitor these interactions.

Moreover, the structuring of this mass of data is what the industry calls ‘big data’ analytics. I think that as corporations increase spending and awareness of the ROI of structuring this data then they will increasingly see the need to capture it–which is where Nice comes in.

Another positive would come if Nice underwent the merger/takeover that some parts of the press think it will do with its rival Israeli firm Verint Systems Inc. (NASDAQ:VRNT). I think this deal would make good sense for both companies and discussed the subject here. Verint is stronger in fraud prevention and security while Nice is strong in compliance and analytics. In a timely reminder of this Nice saw its notoriously lumpy security revenues come in a bit lower than expected thanks to a couple of deals slipping into the next quarter. In addition, the key verticals that they sell to are complimentary. A deal makes sense.

Where Next?

I think the stock is attractive, and the announced intent to pay a 64c dividend is a good way to start returning some of its strong cash flows to investors. I think a forward PE of around 15x is decent value, and that gives a target price of around $40 with some upside because I think the management is being conservative with guidance.

The article The Market Is Wrong, These Results Were Nice originally appeared on Fool.com and is written by Lee Samaha.

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