Nice Ltd (NICE) 2003 Q4 法說會逐字稿

I would like to welcome everyone to the NICE Systems' fourth-quarter 2003 results conference call. All participants are at present in a listen-only mode. Following management's formal presentation instructions will be given for the question and answer session. As a reminder this conference is being recorded February 4, 2004. I would like to turn the call over to Rachela Kassif.

Good morning, good afternoon to everyone. This call may contain forward-looking statements as defined in Private Securities Litigation Reform Act of 1995. Such statements are based on the current expectations and (technical difficulty) subject to a number of risk factors which market requirements, declining demand for the Company's products and the ability acquired operations, product, technologies market share pricing resulting inability to (technical difficulty) which could cause the actual and performance of the Company to differ materially from those described herein. (technical difficulty) On the second obligation from these forward-looking statements. A description of risk factors and uncertainties affecting the Company, please refer to the Company's report filed from time to time with the Securities and Exchange Commission.

No I would like to turn over the call to Haim Shani, President and CEO.

I am pleased to report a strong finish to the year 2003 with Q4 setting new records for revenue and net income before special charges. Taking into account the revenue of our COMINT/DF business which was treated as a discontinued operation we came within the range of our revenue guidance with 63.2 million. On the same basis we had 230.8 million revenue with 83 cents per diluted share in line with our guidance of at least 80 cents per share. Lauri will go over on a GAAP basis in a moment.

In Q4 our reported revenues increased 10.5 percent sequentially reflecting growth in all parts of the business and in all geographies. Growth in Europe was particularly strong in Q4 versus the prior quarter and reflects the success we are having in leveraging the ex-TCS channels. In the fall we won the largest (indiscernible) deal in Europe, a seven digit multisided business with a major new customer. In fact I have just met the customer who is doing some test before delivery here in Israel and he is extremely satisfied with what he has seen so far.

In addition, we won a major and very important digital deal with a major U.S. airport, one of the largest in the world. Now our Q4 call a year ago, we outlined several areas of focus for 2003. I am pleased to say that we made significant progress in each of these areas. One important trend we identified was the convergence of the VolP and data network and the related demand for voice-over IP recording in both the COMINT/DF centers and the trading floors (ph) . This trend continued to accelerate during the year and our (indiscernible) voice-over activity was a factor in our market share growth.

We have a strong focus on this area, we are able to solidify our relationship with each of the voice-over IT infrastructures providers.

The EBITDA (ph) in Q4 over 25 new sites. We expect this trend to continue in 2004 as well. Another major area of focus for 2003 was continuing to expand global president. Our overall revenue was up 44 percent year-over-year. We grew 55 percent in India. This reflects the rapid integration of the TCS acquisition which enables us to leverage both the XTCS and the XTCS channel relationships. These channel relationships are stronger than ever and are a major partners of our business now is growing as a result of having nice products to sell. Our initiatives at selling more of our security related products in Europe in 2003 was also a success.

We also had very strong growth in (indiscernible) during 2003. Positive economic growth in Japan and Australia combined with the continued trend to our outsourcing in India and the Philistines helped fuel this growth. Our ability to capitalize on this trend resulted from our decision to move quickly a year ago to build up our infrastructure in India and (indiscernible) resources elsewhere in the region.

Strategic partnerships was another area of focus during the past year. The time of the acquisition, most of this year's business in the U.S. related to the ATC (ph) safety (ph) sector. One of the most important strategic relationships gained through the TCS acquisition was the one with Motorola. Throughout the year we continued to cultivate and strengthen this long-standing relationship with Motorola. As you may recall, we (indiscernible) Motorola from several major projects including the underground (indiscernible) network system.

Recently we (indiscernible) our relationship with Motorola in an agreement that included a joint development in marketing engineering. We're confident that this relationship will be a source for product growth through our public safety business going forward.

A second major strategic relationship as we cultivated during 2003 was with IBM. This is a very broad based strategic relationship that encompasses both our voice and video products. Some of you may recall that last week IBM announced the digital video surveillance was gaining in both the area of focus for them and now IBM and NICE are proactively offering integrated intelligence video surveillance solution. Recently NICE installed a digital (indiscernible) surveillance system at IBM in NICE's official briefing center which will be used to demonstrate the Next Generation digital capabilities to IBM customers as part of IBM's digital media offering.

On the other side of the house, we worked with IBM to (indiscernible) for voice and voiceover code solutions, both financial service customers in Europe. (indiscernible) functionality and IBM design and integration services prove to be the winning combination. It will take quite some time to build this relationship full potential in different areas and different regions are likely to develop with a different base. Yet, there is no question that the potential afforded us by this strategic partnership is enormous.

As many of you have asked me the last few months we should overlook the importance of our long-term strategic partnership with Avaya. Our relationship with Avaya remains very strong at all levels in all geographies and at the corporate level as well. We have a very strong pipeline for 2004 and we're also integrating the latest Avaya and NICE technologies. We believe and know that this relationship is important for both companies.

Initiatives designed to improve our gross margins during 2003 was even more successful than we expected. Through a shift in our revenue mix based on the leveraging of our professional services organization and the full impact of the outsourcing of a major portion of our manufacturing, we are able to improve gross margin from 48.7 in Q4, 2002 to 55.5 in Q4, 2003. By holding the line on operating expenses while improving revenue in gross margins, we significantly our profitability in 2003 to 13.9 million from 1.4 million in 2002 and we generated 38 million in net operating cash flow.

Another important initiative of 2003 was continuing to improve our business processes by withdrawing our non-productivity and shifting those resources to higher potential areas. This led to our decision to sell the assets of our COMINT/DF military related business to ELTA Systems for $4 million in cash. This transaction has not yet closed and Lauri will explain the requirements to show this business in our P&L on one line as a discontinued operation.

While we have withdraw from the military related business we stepped up our investments in developing our COMINT analysis (ph) products through both enterprise and security application. As part of this major development (indiscernible) , we are closer to key customers to obtain the input and fee base (ph) and we are very encouraged by the validation of our strategy and vision from customers.

Now it is time to begin translating this vision. We first described to you a year ago into reality. During 2004, we start to transform the company from primarily a product-focused company, selling encoding platforms and quality software to a solution-focused company selling enterprise-wide business performance solutions based on data from unstructured multimedia interactions. Of course this transformation will not occur overnight. It will be more of an evolution for us. We will begin by upgrading the fee base (ph) of our (indiscernible) to focus on the higher consultative selling and by gradually leveraging our large install base of customers by introducing new software applications.

We also intend to provide more value added services to help promote (indiscernible) and to generate an additional revenue stream. The work and objective of course is once the initial work has been done is to develop additional partnerships with integrators and strengthen and expand existing ones. An important role for our value added service capability will also be to bring channel partners and to target specific vertical markets which is specific for our position.

We intend to maintain our leadership of our core recording and quality monitoring business as well as introduce new security performance solutions for applications such as (indiscernible) prevention and other security related needs. We expect to go beyond recording to provide the widest array of solutions to the (indiscernible) market and continue our penetration of Europe and Asia-Pacific.

I will now ask Lauri to go over the financial and then we will discuss the outline for Q4, Q1 and beyond before taking your questions.

First, I will go over the quarterly and annual results on the basis most of you have been tracking us. Non-GAAP revenue including COMINT/DF in the fourth quarter was $63.2 million, the corresponding non-GAAP EPS of 39 cents. For all of 2003, non-GAAP revenue including COMINT/DF, $230.8 million with non-GAAP EPS of 83 cents per share.

Now I will go through Q4 results in detail. After reclassifying the COMINT/DF business as a discontinued operation, GAAP revenue for the fourth quarter was $61.7 million, 10.5 percent sequential increase from an adjusted $55.9 million in Q3. Please note that we have adjusted the results of the most recent eight quarters to reclassify the COMINT/DF business as a discontinued operation in all periods for comparability. For your convenience we have provided a supplementary spread sheet that shows the adjusted figures for all quarters of 2002 and 2003.

Usual geographic breakdowns are as follows; Americas accounted for $30.2 million or 49 percent of revenue, compared to 53 percent in Q3. Europe, Middle East-Africa accounted for $32.1 million or 36 percent of revenue compared with 32 percent in Q3. Asia-Pacific accounted for $9.3 million or 15 percent of revenue, about the same as Q3.

Gross margin continued to improve as a result of higher volumes and a greater proportion of software in the mix and better utilization of our services organization. In Q4, gross margin was 55.5 percent, up from 53 percent in Q3, and 48.7 percent in the final quarter of 2002.

Operating expenses in Q4 included $5.2 million of settlement costs in connection with the Dictaphone lawsuit. Excluding settlement costs and currency impact, operating expenses in Q4 were about the same as Q3. Net effect of currency exchange rates on revenue were minimal in Q4 versus Q3, but the weakening of the dollar against the sterling and the shekel did have a negative impact on operating expenses in Q4 and financial income was lower in Q4 due to moderate net currency exchange losses compared with currency exchange gains in Q3.

Net income from continuing operations in Q4 was $6.7 million or 11 percent of revenue and earnings per fully diluted share from continuing operations was 37 cents per share computed on 18 million shares. This compares with 19 cents per share computed on 16.9 million average shares in Q3. Net operating cash flow from continuing operations in the quarter was $11.3 million.

Turning to the balance sheet cash and equivalents at year-end totaled $107.3 million, up from $93.2 million at the end of Q3. In addition to net operating cash flow, the increase comes from cash received from the exercise of employee options.

DSO at the end of December was 74 days compared to 70 days at the end of September and 112 days at the end of 2002.

Now let's cover the annual comparisons. Revenues for all of 2003 reached $224.3 million, a 44 percent increase compared with 155.3 million in 2002. Product revenue was 31 percent and services revenue more than doubled reflecting our focus on leveraging our service capabilities. Gross margin increased over five margin points to 62.6 percent versus 47.5 percent in 2002 primarily reflecting higher volume as more software content in the mix.

Operating expenses increased to $106.4 million from $79.7 million primarily as a result of the inclusion of TCS for a full year. Operating expenses as a percent of revenue declined from 51.3 percent in 2002 to 47.4 percent in 2003. Net income from continuing operations for the year was $12.4 million or 6 percent of revenue, compared with a net loss of 2.8 million 2002.

For the year, earnings per fully diluted share from continuing operations was 74 cents compared with a loss of 20 cents in 2002. Net operating cash flow from continuing operations for the year was $37 million compared with $17 million in 2002.

Now I will turn the call by Haim to discuss the outlook for 2004.

In Q1 we expect revenues of 58 to 60 million reflecting the normal seasonality and consciousness (ph) about the strength of IT spending during the early part of the year. This represents a 12 to 16 percent increase over the unadjusted Q1, 2003 figure. We expect EPS to be 12 to 14 cents a share. Continue to have a strong and growing pipeline particularly in the securities area.

One time I mentioned that we had over $50 million of business identified in the pipeline in this respect. During Q4, we booked orders for $6 million of that amount and the rest is still in the pipeline. Actually just today we received another seven digit order from a major public safety entity in Europe.

Our COMINT solutions now being evaluated at the U.S. military base and we have just completed the evaluation stage with a U.S. operator of critical infrastructure, a major utility company. As I indicated earlier, our major development efforts over the past 18 months are nearly concluded but we must now ship resources toward our sales and marketing and business development efforts to expect the important position I described.

We will be introducing new applications and expanding the scope of our involvement beyond our traditional boundaries in both the enterprise and security segment. This will require new additional relationships and new skills sets which requires an upfront investment with (indiscernible) before they translate into higher revenue. We expect to accelerate our investments in capsulating (ph) activities and partnerships during the first half of 2004 and to realize the benefits in the second half and most significantly in 2005.

For all of 2004, we expect to see growth in revenue of 10 to 15 percent from the total 24 million recorded for 2003; and a 50 to 60 percent increase on the 2003 EPS from continuing operations of 74 cents a share to between 1.1 and 1.2 dollars per share for 2004. Now we would be very pleased to take your questions. Thank you

(OPERATOR INSTRUCTIONS) Danielle Marine (ph) of IBI (ph) .

Can you give us a sense on what the impact of the sales and marketing on the 2004 outlook and then specifically for the first quarter and then the impact of the share solution? How the year should look like during -- in a breakdown of quarterly results?

I think basically we would like to see the business overall growing between 10 to 15 percent on the top line. We expect between 58 to 60 in Q1 and then continuing to grow from there until we reach the total of whatever the numbers are, to 47 if I am not mistaken to 50 plus. That is the breakdown. We see a grad will increase which is very typical to our business model. This has been more or less our business model over the last three years and we expect the same business model even with slow start in the first quarter which still represents a growth -- not significant -- but a growth over Q1 of last year and we expect this trend to continue.

And the impact of the sales and marketing in the dilution?

The impact of the sales and marketing will affect the overall bottom line of the company and overall we see that the -- we believe that we will see the impact in terms of where we see results hopefully in the second half of the year and obviously most of 2005.

Thank you.

Will Manual (ph) of HSBC (ph) .

Can you give us an idea of where you see gross margins going next year? Do you see them declining from the average level of Q4 or where do you see them?

We still think that the year-over-year there is room for growth by the combination of different mix, selling more solutions, better utilization, volume so year-over-year we think that we can and should improve our gross margins going forward.

In that case so you didn't prize quite a big increase in operating expenses, can you give us some sort of ballpark idea of how much you're going to decrease sales and marketing by? Are we talking 10, 20 percent, 20, 30 percent?

Next year, looking at operating expenses increasing approximately 10 percent.

I'm sorry, I didn't get that. How much?

Less than 10 percent.

Okay.

Especially if they came earlier. Perhaps we should relate to the year as well. As you may have noticed, share counts for Q4 was up to 18 million shares outstanding.

Right.

That is most directly affected by changes in the share price, given that we are assuming an increase in the weighted average shares outstanding for next year.

Can you give us a breakdown of the security side of things? Can you split it into video?

Let me split it the way we have been talking about it the last few quarters as well as going forward in percentage terms. Sales to the context of the trading floor markets represented 77 percent of revenue in the fourth quarter. Digital video represented 12 percent and sales to the public safety and government market, 11 percent.

This excludes the COMINT/DF business.

Okay. When do you estimate the content Analytix product to be launched?

It depends on the type of market. We are in a gradual launch right now. We stressed our (indiscernible) to our satisfaction. So we will be in effect of the business toward the second half of the year.

Okay, thanks.

Hinan Calagard (ph) of Leder (ph) .

Regarding the -- you were talking about ramping up the sales force or your marketing efforts -- what does this mean in an operational way? Are you going to hire more sales force? How is it going to spread out along the year and how do you expect it to affect margins? Will we see first a ramp up in Q1 of marketing expenses and then in Q2, Q3, Q4 we hope to see a surge in sales?

Let's talk about risk factor, how much of a risk do you see -- you said you just finished developing the technology, now you have to see if the market accepts them, how much are you sure that the market will accept these news technologies? Thank you.

I am sure that you understand that I will not be able to outline exactly our plans because I assume that some of our competitors would like them in very deep detail. What I will say first of all we are taking market share from competition. The results of NICE in 2003 and specifically in the fourth-quarter are to us a demonstration that we taking market share from competition on what we do today. Irrespective of our continuing of launching new technology, we believe that we can leverage the relationship with the Motorola's and IBM that we announce. In order to support this type of relationship we obviously need to cultivate them, to support them and so on.

We are also growing and developing our consultative model and we will require people with the right experience to do so. We are also growing and compared to last year and two years ago, we have grown significantly in the Far East and we think that we can continue to grow in this area and also in some part of Europe, including the type of product that we sell today.

In addition to it, why we continue to perform with our existing business we think that that there is great opportunity for NICE to leverage our huge install base, leverage our technology, leverage our relationship also to include Europe additional application. We are not replacing everything that we are doing with the new model; we are adding and on top of it upgrading huge levels. We are investing in some discretionary marketing expenses, so overall these are the types of things that we intend to do. Some investments in (indiscernible) operation whether it is sales, research, marketing, and business development with strategic partners continuing to grow our existing type of business and developing new applications in their markets.

How do you see R&D levels? You've spoken about the fact that a couple of the projects have reached their goals in the developing stage. Do you see a decline in the R&D expenses?

There will be some increase in R&D expenses. We think that as I said, we are able to open if you like, a technological gap between us and our competition therefore we will increase R&D expenses likely by a few percentages.

That means we will see as the level of percentage we have a chance to see the same percentages we saw in 2003?

We expect that operating expenses will represent a lower percentage of overall revenue next year than in 2003 and that is with both R&D and sales of markets as well.

Thank you very much and have a lot of good luck.

(indiscernible)

Could you speak a little bit about visibility? Has that changed? Has anything changed there? Also regarding competition, any changes there?

No, there is no major change in our business model. We are operating with the same business model so I cannot say that there was any significant for better or worse in this respect. Maybe a slight increase or a slight improvement of visibility but overall our business model remains more or less the same. We are seeing of course as I already said a lot of prospects and a very good pipeline but overall the visibility model of the company is the same. That is regarding this part of the question.

Regarding the competitive landscape, it is more or less the same players and as I said, from our internal research and also from our (indiscernible) research, we believe that we are actually capturing market shares in basically every part of our business.

Do you have specifics on that? Specific figures regarding market share?

There are some specifics in this industry that are being published. Some segments that are official if you would like, market research and others are more or less our internal estimates.

Regarding the tax rate, what should we be modeling for 2004? It has been a little bit erratic to say the least. Is there anything to help us in terms of modeling that in?

I would have to suggest that you use roughly the same average that we had in 2003.

Okay. Thanks.

Jeff Nians (ph) of First Analysis.

Just a question on the VoIP product sales for your call center product. Are you seeing a lot of your customers deploying VoIP across their call centers and as a result they are buying this product, or is there some combination of bad end customers buying VoIP because they know in five years they are going to eventually have their entire call center on VoIP?

We actually see the majority of the VoIP today not in the what we call the traditional large call center but they're mainly deployed in what we would be better defined as back offices operation and financial institutions. This is (indiscernible) deployments indications call centers probably on a smaller scale. The vast majority of the VoIP will come from the financial world.

On the Analytic applications that you are going to be developing or you already developed, could you maybe just spend a second and talk about what exactly those analytic apps are doing?

Yes. Again without going into too many details for obvious competitive reasons, we believe we know from talking to customers that the type of data that is captured using the NICE technologies is included in both customer interactions or what the video captures and provide business value beyond the pure compliance risk management dispute settlement of quality monitoring. Analyzing these interactions, analyzing the type of data that is captured on the NICE technology can provide additional (indiscernible) with additional insight into the customer interactions, whether it relates to marketing, to operations or other parts of the business.

I didn't realize that you hadn't talked about it yet. You’re basically taking the data that your gathering from your current products and you're going to be analyzing that and offering solutions on top of that?

Correct.

Related to Avaya, two parts to it; one, do you break out the percentage of revenue in a quarter to Avaya? Secondly, you had mentioned that you are integrating your technologies, is that an OEM agreement or is that integrating technologies in Avaya's new or next generation product, whatever that is?

We have decided not to take any one side as announcement regarding our relationship with Avaya. So I believe that I have said enough. We are very happy with this relationship and we are also, we believe it will continue to grow and provide significant benefit to both companies.

Are they OEM-ing your call center product?

We have decided not to take any one-sided announcements about our relationship with Avaya. If there will be any specifics, if there are specifics they will only come jointly between us and Avaya.

So publicly there has been no change to the relationship?

That is not what I said.

Okay. Do you break out the percentage of revenue in the quarter from Avaya?

No, but as I said we have a very strong pipeline with Avaya. The relationship are good, are excellent actually in all levels and we are very optimistic going forward and Avaya we believe is as well.

Thank you.

Shual Eyal with CIBC.

You mentioned before about expanding into additional verticals. Can you just quickly touch on that? The other question is with respect to head count. How did you finish the year and what are your expectations heading into 2004?

What I mentioned regarding verticals was that we believe that there is now two applications to (indiscernible) to verticalize the applications rather than having them completely generic. That is what I meant. It was not necessarily spending into additional articles. I think that NICE today is operating in a large enough number of articles in the marketplace. It is more than (indiscernible) our solutions to specific verticals rather than just a generic product.

And with respect to the head count?

We ended 2003 with 1045 staff and we expect to see our staffing levels at the end of 2004 grow by approximately 5 percent.

I know you have been asked already on the competitive landscape but I'm trying to kind of come to the question from a different angle. How do you differentiate yourselves going into a client over your competitor? Is this the broad base of the solution that your provide, or the fact that right now you are coming and saying I'm a solution rather than a product provider? What is the strategy behind it?

Bearing in mind that other people would like to know this answer as well I have to be very generic in my answer and I apologize for that. What we have today is probably the most comprehensive product portfolio in this market. We cover if you would like the market in terms of geography better than anyone else. We have a very significant presence that can help global customers in all aspects of the business and this is very important. I believe that also our relationships are extremely important from point of view of our partners of strategic relationships. And I think the bottom line is that customers have realized that by investing in our technology, they can make money. And save money. I think that the ROI on implementing our technology relatively fast enough is critical in them making their buying decision.

Obviously there is a very good process taking place as you indicated in transforming the company from a source to a solution company, obviously (indiscernible) but do you feel or do you think you are doing enough both to your clients in the first place and obviously to the market?

First of all, enough is not an objective measurement. I think we are --as I said, this is not a revolution. This is an evolution and slowly by slowly we are planting the seed both from a technology point of view, from an investment point of view, and also from an investment relationship point of view. It is part of our investment in the marketing that we will be doing this quarter and next quarter to communicate this message to the outside world and also internally and this obviously takes time and effort.

So, bottom line probably not enough and this is the reason why we want you do more especially in the first half of 2004.

Thank you very much, good luck.

(indiscernible)

If you had to write down the option as an expense, how much money will that be in 2003?

First of all that really does depend on which method of measurement you use. As you may know, there has been some dispute whether the Black and Scholes model is the best model to use. That being said, even last year the number of options that were issued have declined dramatically so if and when we get to that point in 2005, we don't expect it to be very material.

How many options are there announced today? And the second one, the number of options, not just the diluted?

Why don't you ask one more question while I get the answer for you, okay.

That is all the questions.

We will come back to this in a second if there are questions from any other caller.

Will Manual.

One item that has been (indiscernible) on financial income, can you explain why and what we can expect for '04?

The question, Lauri, was on the financial income.

In the fourth-quarter?

Yes, generally last year was pretty erratic and yes why is that and what can we expect for this year?

First of all, 2003 was characterized by foreign net currency exchange gains and others with net currency exchange losses. By way of example in the fourth-quarter we had a small net currency exchange loss compared with gains in the previous quarter. That being said, moving forward, barring any significant movements in exchange rates we would expect the level of financial income to remain fairly steady in the area probably about the average where we had the last two quarters.

Okay. Thanks.

We do have another follow up from Danielle (indiscernible) .

Can you give us a sense on (technical difficulty) the COMINT business, what was the breakdown on a geographic basis and by productline CM, PDO and QD in the third quarter?

I think we have given it but we have no problem to give it again. On a geographical basis, our business was 49 in the U.S. or actually in the Americas, 36 percent in India and 15 percent in Asia-Pacific.

I was talking about the third quarter.

Third quarter, Americas, 53 percent; Europe, 32 percent; Asia-Pacific, 15 percent. The productline as well? Contact (indiscernible) toward 78 percent; video, 12 percent; public safety government, 10 percent.

Thanks.

I am looking for the total number of options that you have now.

Total number of options that are outstanding as of the end of 2003, 4.9 million.

Can you give me the average conversion number? Average stock price?

The weighted average exercise price is up $27.

$27, thank you.

(indiscernible)

I have a question specific to operations. What prompted you to exit that business? Go through that again? When do you think you will be able to sell that? What type of price are you looking for?

First of all, the business has been sold. We announced the sale. It was sold for $4 million in cash to ELTA and this announcement was last year so we have not closed the transaction because it is waiting for the authorities to get all the relevant approvals. What has led us to make this decision was the fact that while this was a small business, we had a very, very small market share in this business and this is not in line with our strategy to lead the different market segments that we operate in.

In addition to that, we said there was no real synergy, both on the technology side and the market side so it was kept more or less to separate entity with ups and downs and took the management and the resources to make this business continue to grow. We felt the same resources is deployed over a period of time to our core business it actually strengthened our position in the areas where we are strong and we have given up the small businesses where we were one or two or three percent mainly as an OEM supplier and not part of our growth strategy.

In terms of head count, how many of those people were in the services part of the business?

You're talking about the COMINT business or in general?

In general. Just your total ongoing businesses.

As part of our ongoing business how many are in the professional services, the number is about 290.

I imagine that in the last quarter you had a high utilization rate of those people? Do you anticipate that first half of '04 that will go down or is that a leading indicator that you have a lot of services projects going on now that will -- ?

I am not sure I heard all of the question from the beginning so I apologize, but you will have to repeat the question.

I am just wondering whether in Q4 you had a lot of services revenue, it seems to have grown faster than your product revenue if we should anticipate some change in mix Q1 and Q2 by changing the utilization rate of services?

We estimate this will be more or less the same between services and products, more or less.

Thank you.

(OPERATOR INSTRUCTIONS) There are no further questions at this time. Before I ask Mr. Shani to go ahead with his closing statements, I would like to remind participants that a replay of the call is scheduled to begin in two hours time. In Canada and the U.S., please call 1-866-500-4953; in Israel, please call 003-925-5950. Internationally call 972-392-5950.

Thank you for your time and attention and we look forward to a very successful 2004. Thank you.

This concludes NICE Systems' fourth-quarter 2003 results conference call. Thank you for your participation. You may go ahead and disconnect.