NEW YORK, Sept 21 — It’s been a volatile seven months in the stock market for Nice Systems Ltd since Barak Eilam was named chief executive officer in February. First, there was a 21 per cent rally, then a 17 per cent plunge starting in mid-April.
The stock is back in rally mode now, climbing 7.4 per cent over the past month, as investors gain confidence that Eilam can shore up the company’s profits by tapping into growing demand for data analytics. It was a worse-than-expected first-quarter earnings report, released about a month after Eilam officially took over, that unnerved investors and triggered the selloff from mid-April to mid-May that marked its worst rout in almost two years.
“It’s been some choppy execution over the last few quarters,” Daniel Ives, an analyst at FBR Capital Markets, said by phone September 17 “Investors are starting to show some optimism that the new CEO could turn this around and help them restore some of the magic and go after this big data opportunity.”
Nice’s gain since August 19 beat the 4.6 per cent return on the Bloomberg Israel-US Equity Index. The company’s US-listed shares rose 1.1 per cent last week to US$40.85 (RM132.05) compared with a 0.5 per cent retreat in the index. Israel-traded shares closed 1.4 per cent down to 149.1 shekels (US$40.78) in Tel Aviv today.
Billionaire George Soros, whose Soros Fund Management increased its stake to 2.8 per cent in the second quarter, is Nice’s third-largest shareholder, according to regulatory filings through June 30.
Helping corporate customers analyse reams of data from multiple sources, known as big data, is transforming business, with technology giants like Oracle Corp and International Business Machines Corp seeking out acquisitions in a bid to stay abreast of the technology.
Nice analyses the surveillance data it collects in real time in all three of its main businesses, call centres, public security, and financial crime and compliance.
While Nice has been using computer algorithms to analyse unstructured data, like video footage from airports or voice recordings from customer call centres for years, it hasn’t fully taken advantage of the demand for analytics, said Greg McDowell, an analyst with JMP Securities LLC in San Francisco.
Eilam, who formerly led Nice’s US operations and helped create its data analytics group, is likely to improve this, he said.
“That whole real-time analytics angle, selling that to their big install base, that’s a big component of their ability to accelerate growth,” McDowell said by phone September 19. “Investors also see that there’s room for operations improvements in the business, and he’s the right guy to make these operational improvements.”
Nice’s net profit fell 7.5 per cent in the second quarter to US$34.7 million, while revenue grew 6.3 per cent to US$239 million. Sales are forecast to increase 6 per cent in 2014, down from 8 per cent last year, and the fourth straight year of declines.
“We’ve seen consistent revenue growth, and more importantly, around analytics, we’ve been seeing rapid growth,” Marty Cohen, vice president of investor relations, said by phone from New York September 19. “The future of Nice is in analytics.”
Eilam has also pledged to boost growth by more aggressively pursuing acquisitions.
Growing Nice’s call centre business, which helps companies better manage customer interactions, may prove a challenge for Eilam, said Chuck Schwartz, who helps oversee $30 billion as a portfolio manager at Eagle Asset Management and holds Nice shares.
Call centre management “is not a particularly fast growing business and needs some deal making to get things going,” Schwartz said by phone September 19 from Stowe, Vermont. “I think they had a lack of acquisition candidates in recent years to help boost that growth.”
There are M&A opportunities in all of Nice’s business segments, Cohen said.
The Soros Fund increased its holding of Nice by 37 per cent to 1.65 million shares in the second quarter, worth US$67.3 million as of June 30.
With a net worth of US$26.1 billion, Soros is the 23rd- richest person in the world, according to the Bloomberg Billionaires Index. Michael Vachon, a New York-based spokesman for the fund, didn’t respond to an e-mailed request for comment.
Ten of 14 analysts have the equivalent of a buy rating on Nice shares, which are forecast to rise 12 per cent in the next 12 months to US$45.86, according to data compiled by Bloomberg.
The shares trade at 14.3 times 12-month estimated earnings, less than half the 34.7 average among application software companies.
“Because Nice has been around for a while, it’s been overlooked” as a big data play by investors, said Shyam Patil, a Los Angeles-based analyst at Wedbush Securities who has the equivalent of a buy rating on the stock. “The street is viewing the new CEO favourably, he seems to be a little more aggressive, has good ideas, and seems committed to returning the business back to growth.” — Bloomberg