Nice Systems Ltd. (NICE)’s $150 million purchase of Merced Systems Inc. boosted the Israeli technology company’s annual spending on acquisitions to the biggest on record and its shares to the highest in more than two weeks.
The Israeli maker of digital surveillance and monitoring systems climbed 1.5 percent to 128.50 shekels, or the equivalent of $34.27, at the 4:30 p.m. close in Tel Aviv, the highest since Nov. 16. The shares rose 6.8 percent to $34.20 in New York last week. The Tel Aviv’s TA-25 Index (TA-25) dropped less than 0.1 percent today.
The acquisition of Merced last week gives Ra’anana, Israel- based Nice access to the U.S. companies’ customer list, which includes Coca-Cola Co. (KO), Bell Canada and Dell Inc. (DELL), Chief Financial Officer Dafna Gruber said by phone last week. Nice completed the purchase of voice-over software maker Fizzback for about $80 million in October after buying CyberTech International for $60 million in February.
Nice has “a positive dynamic that should keep top-line and bookings growth at healthy levels despite macro headwinds,” said Daniel Ives, an analyst at FBR Capital Markets in New York who rates the shares “outperform.” The company has “a strong track record of successfully integrating acquisitions into the fold,” he said.
Concern among investors that Europe’s debt crisis will curb demand for Israeli exports has pushed the Tel Aviv’s TA-25 Index 18 percent lower this year. The Bloomberg Israel-US 25 Index rose less than 0.1 percent to 84.28 on Dec. 2, paring its annual drop to 19 percent.
Nice climbed 0.7 percent on Dec. 2 in New York, adding to its biggest weekly rise since the five-day period ending Oct. 28. The company spent $290 million on acquisitions this year, the most since at least 1996 when it listed the shares on the Nasdaq Stock Market, according to data compiled by Bloomberg.
Merced’s performance management product will be merged into Nice’s enterprise business, which includes tools for fraud detection, the company said in a statement distributed by PRNewswire statement on Dec. 2. The unit accounted for about 60 percent of Ra’anana, Israel-based Nice’s revenue in 2010.
The acquisition will add about $55 million to revenue and 10 cents to earnings per share in 2012 under non-GAAP reporting standards, Nice said.
“This was a relatively small company selling at $60 million a year with a very impressive list of customers and this was an opportunity for us,” Gruber said. “This was an aggregation move.”
Nice is benefiting from rising demand for its technology used to record customer interactions and to provide fraud detection following an increase in data breaches at companies including Sony Corp. and Citigroup Inc. (C)
In 2010, companies lost about $37 billion to online fraud or theft, and 8.1 million U.S. adults had their identities stolen, according to a February report prepared by Javelin Strategy & Research, a Pleasanton, California-based research group.
“Nice retains significant capacity for acquisitions even after this deal, and the company has stated that acquisitions remain its primary cash deployment strategy,” said Shaul Eyal, an analyst at Oppenheimer & Co. in New York, who has an “outperform” rating on the shares.
The company reported last month third-quarter earnings of 54 cents a share, above the 53 cents average estimate of four analysts surveyed by Bloomberg. Revenue in the three months ending September rose 14 percent to $199 million, according to a statement yesterday.
Nice raised its outlook for 2011 adjusted earnings to a range of $2.05 to $2.09 a share from $2 to $2.08 per share.