Nice Systems (NICE) is one of the companies responsible for the image of Israeli high-tech as an industry of former IDF personnel putting their Intelligence knowhow to civilian use and converting military technologies into communications infrastructures. The company was founded in 1986, by a group of former IDF engineers who, while in uniform, had worked as a team, under the leadership of David (Didi) Arzi. After a long stint in the permanent army, they set up a technological company under the leadership of Didi Arzi himself and his subaltern Benny Levin.
Nice's early years were still spent in uniform, as subcontractor for military industries. Revenues accruing from the projects it executed served to finance research and development in entirely new fields. In this way, at the beginning of the nineties, Nice went into telephony voice recording systems, and then established a small start-up by the name of NiceCom, which hit the headlines in 1994. It developed communications products using state-of-the-art ATM technology and was sold to 3Com for $54 million.
This was the first major sale of an Israeli high-tech outfit to a foreign company, and a generation has since elapsed in Israeli high tech. In 1997, Benny Levin succeeded Arzi as chairman and president of Nice, and instead of selling, he started to buy. Nice acquired two companies for $25 million. The name NiceCom was also subtly but very significantly changed to Nice.Com.
But the task facing Benny Levin, of advancing the company from the pioneering stage to maturity, was no simple matter. The market in which the company operated had changed over the years. Instead of selling to government concerns eager to record telephone conversations, Nice positioned itself advantageously in the commercial telephony market, especially on the trading floors of stock exchanges and large financial institutions, insurance companies, mutual funds and airlines. In short, in all bodies that do a great deal of business by telephone and need to document it.
Integrating foreign companies into Nice's consolidated business culture was no simple matter either. The attempt to enter the field of telephone call-in centers using the products of Canadian company Dees, acquired for $21 million at the end of 1997, resulted in a profit warning that sent the share tumbling by 50%.
This time, Benny Levin had to handle the crisis - "I believe we will straighten out again" - he told "Globes", and inaugurated the type of restructuring investors hate. He redefined the company's target market, switching the focus to the high market, with its very exacting demands, but excellent solvency, on the assumption that long-term investment was to be preferred over short-term corrections.
How right he was became apparent a year later. Sales climbed 29% to $57 million in the first nine months of 1999, the share recovered and is now bobbing about in the range of $40-50, and the telephone call-in centers have become a major profit-maker, accounting for 50% of the company's revenue.
At this juncture, Benny Levin, Nice's New Age strategist, is training his sights on new targets. He just acquired STS Software from Mer Technologies for $4.7 million.
Levin projects optimism, and not long ago estimated that sales would grow significantly as soon as the Y2K Bug festivities died down. In many senses, however, his job is harder than the one Didi Arzi had to do. He operates within a public company, in which every slight shift in the sales volume prompts analysts to issue "Buy" or "Sell" recommendations. Even the market itself is crueller than in the past. Nice went to market with an innovative product, the NiceLog, which was ahead of its time, thanks to knowhow acquired behind the scenes. Now the company has to cope with market changes and supply products in an efficient Internet format. As in an elephant trail, Levin must run faster than the competition, or be trampled by them.
Published by Israel's Business Arena December 22, 1999