Nice Ltd (NICE) 2010 Q4 法說會逐字稿

Welcome to the NICE Systems conference call discussing fourth-quarter 2010 results and thank you all for holding. All participants at present are in 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 15, 2011. I would now like to turn over this call to Anat Earon-Heilborn, Investor Relations at NICE. Please go ahead.

Thank you, operator, and good day, everyone. With me on the call today are Zeevi Bregman, President and Chief Executive Officer; Dafna Gruber, Corporate Vice President and Chief Financial Officer; and Eran Liron, Corporate Vice President, Business Development.

Before we start, I would like to point out that some of the statements made on this call will constitute forward-looking statements. In accordance with the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995, please be advised that the Company's actual results could differ materially from these forward-looking statements.

Additional information regarding the factors that could cause actual results or performance of the Company to differ materially is contained under the subheading forward-looking statements in the Company's 2009 annual report on Form 20-F as filed with the Securities and Exchange Commission on March 31, 2010. Such factors and forward-looking statements are based on the current expectations of the management of NICE Systems Ltd. only and are subject to a number of risks and uncertainties that could cause the actual results and performance of the Company to differ materially from those discussed herein including but not limited to the impacts of the global economic environment and the Company's customer base, particularly financial services trends, and their resulting uncertainties; changes in technology and market requirements, decline in demand for the Company's products; inability to timely develop and introduce new technologies, products and applications, introduce new technologies, products and applications; difficulties or delays in absorbing and integrating acquired (inaudible) products, technologies or personnel; loss of market share, pressure on pricing resulting from competition and inability to maintain certain marketing and distribution agreements. The Company undertakes no obligation to update or revise these forward-looking statements except as required by law.

During today's call, we will present a more detailed discussion of fourth-quarter and full-year 2010 developments and the Company's guidance for 2011. Following our comments, there will be an opportunity for questions.

Let me remind you that unless otherwise noted on this call, we will be commenting on our adjusted results of operations which differ in certain respects from generally accepted accounting principles as reflected mainly in accounting for acquisition related revenues and expenses, amortization of intangible assets and accounting for stock-based compensation. The differences between the non-GAAP adjusted results and the equivalent GAAP figures are detailed in today's press release. With that, I will turn the call over to Zeevi Bregman.

Welcome, everyone, to our fourth-quarter and full-year 2010 earning call. Q4 was another strong quarter for NICE. Our focus on the execution of our strategy continued to yield very good results.

We achieved all-time highs in both revenues and EPS for the quarter and year. Q4 revenues reached a record $187 million, increasing 15% from the fourth quarter last year.

For the full year, our revenues increased 18% over 2009, reaching $695 million. We are pleased to see that all three regions demonstrated a double-digit growth for both the fourth quarter and the full year. We are especially satisfied with the improvement in APAC in Q4.

Non-GAAP earnings-per-share was a record of $0.51 in the quarter, up $0.06 from Q4 last year. For the full year, EPS reached $1.75 up $0.21 from 2009.

Reflecting the strong momentum in our business, we had strong booking in the quarter with book to bill much greater than one. Naturally, our book to bill for the full year continued to be greater than one. We ended the year with much higher backlog than in the beginning of 2010 and we enjoy a very strong pipeline.

Cash from operations in the first quarter was $44 million, bringing full-year operating cash flow to a record $145 million. Our total cash balance at the end of the year was $663 million.

We announced today a stock repurchase plan. It reflects the confidence of NICE management and Board of Directors in the long-term prospects of the Company as well as our commitment to shareholder value. We're confident in our ability to continue and generate substantial cash from operations and to execute this buyback plan while maintaining the financial flexibility to invest in our growth and pursue strategic acquisitions.

Earlier today, we announced the acquisition of CyberTech, a global provider of compliance recording solutions and value added applications based in the Netherlands. The acquisition will enhance our offering with complementary solutions geared towards opportunities we have identified at the lower end of the market. In addition, the deal will enhance our presence in EMEA. We expect a rapid and a smooth integration that will yield top-line and cost synergies. We expect to close the acquisition, our first one for 2011, in a few weeks.

We continue to enjoy healthy demand for our solutions, driven by an increasing number and complexity in transactions, persistent concerns over physical security and fraud and a growing number of regulations.

Moving on to the Enterprise business which had a good quarter in Q4 closing a strong 2010. For the full year, this business generated 20% growth with revenue reaching $528 million, up from $441 million in 2009.

We would like to provide you with more color on the different segments within our enterprise business.

Our Customer Interactions business continued to grow in 2010.

Our solutions are based on a customer interaction hub that captures interaction across various customer touch points. Our cross-channel analytics reveal the customer's insight and deliver insights -- excuse me, our cross-channel analytics reveal the customer's intent and deliver insights to the organization. The real-time impact solution drives personalized response to these insights during the interaction, taking into account the specific context, including the customer's history and preferences. Our solutions enables organizations to impact every customer interaction.

We would like to highlight three specific trends impacting our business. One, a strong demand for our solutions in emerging markets including demand for advanced applications. Two, an ongoing growth in deal size and three, market share gains through competitive displacement.

We are seeing strong performance in our emerging EMEA, APAC and Latin America markets driven by a robust demand for our products. For example, after penetrating a leading Latin America bank in Q3, we received in Q4 a substantial analytics order from another division of this bank. This is one of our largest customer interaction deals ever outside the United States as well as one of our largest analytics deals. We believe that the rapid expansion within this customer illustrates the compelling proposition of our analytics solutions.

The size of our deals continues to grow and the number of customer interaction deals surpassing $1 million that we booked in 2010 was almost 50% higher than in 2009. Consolidations continue to be one of the drivers for this trend, and in Q4 we saw a very large upgrade for a major North American financial institution. This customer has been a client for several years and has now placed an eight-digit order. The deal was driven by the client's consolidation of over 20 data centers into a handful of main hubs and included a complete infrastructure upgrade of existing legacy versions affecting over 30,000 agents that handle over 150 million interactions per year.

Competitive displacements are ongoing and demonstrate acknowledgment of NICE's differentiation and attractive value-add. For example, we won a large deal with a leading provider of e-commerce solutions who selected to replace its existing system because of the advantages of our cross-sell analytics solution. Another example is a large financial institution that had a competitor system installed which reached its end of life. This customer preferred placing a seven-digit order with us over upgrading the competing system at no cost.

One of the key differentiating factors is our ability to provide real time analytics. During 2010 we developed a wide offering that includes a variety of capabilities. We are very pleased with the market traction for our real-time impact solutions, augmented by the eglue acquisition. We are confident regarding the prospects of these solutions for 2011.

We continue to enhance our real-time offering and last month we introduced the addition of real-time speech analytics. The new capability enables organizations to understand customer intent during the interaction. Agents are automatically provided with the necessary insight and next-best-action recommendation, for an immediate impact that benefits both the customers and the business.

We will keep providing our customers with solutions that impact every customer interaction, be it through increasing revenues, improving profitability, perfecting the customer experience or ensuring regulatory compliance. We further enhanced our strong position in this business with the acquisition of CyberTech.

With this, I will turn to our Financial Crime and Compliance business, which had a very strong year.

The growth in this business is fueled by our number one position in the market as well as by our ability to upsell and cross-sell our solutions enterprise-wide.

We continue to expand our market share and in 2010, more than a third of our customers in our financial crime and compliance business were new ones.

In addition, ongoing expansion within the existing customer base is also an important growth factor as we keep innovating additional modules for them to add to their technology investment with us.

In Q4 for example, a very large US client, which has been using our financial crime and compliance solutions since 2004 bought multiple additional solutions at a total cost in the mid-seven-digit range. This expansion included the purchase of our Customer Due Diligence solution for one of their lines of businesses, extension of their Employee Fraud program with us and selection of our Enterprise Risk Case Manager technology to manage risk in yet another department within this bank. This bank is now using our solutions for AML, fraud prevention, brokerage compliance, investigations and other risk operation needs across more than a dozen areas in the bank, and the relationship keeps growing as we expand and innovate.

We expect this trend to continue in 2011 as our solutions are implemented enterprise-wide and as our customers' relationships with us become more strategic. We further expect that growing financial client threats and rising regulatory pressure will keep driving this business forward.

Turning to our Security business, this business generated annual revenues of $167 million in 2010 compared with $148 million in 2009.

Our security business focused in 2010 on strengthening the position of our distinctive solution in video surveillance and in situation management. We believe that the combination of these offerings creates a unique differentiation in this competitive and fragmented market.

The market for our situation management solution is still in its early stages. We are seeing growing adoption mostly in the US but also in other regions. Our clear global market leadership, which has recently been recognized by IMS Research, positions us well to benefit from its forecasted rapid growth.

IMS also pointed out that early adopters come predominantly from the transportation and utility sectors, and the deals we won during the year confirmed this trend. I will mention only a couple of recent examples.

Following our Q3 announcement of a solution tailored for electric utilities we won an additional deal in this space as early as Q4. The customer is one of the largest combined electric and gas companies in the US, and the unique value we bring to NERC compliance was a key factor in this selection.

A deal that highlights the potential of our existing customer base in this part of our business too is with a very large North American mass transport authority. This authority has been a security customer for several years starting with audio solutions, advancing later to video solutions and adopting now our situation management solution as well.

Our security business has a strong pipeline which includes some very exciting opportunities. At the same time, some of those opportunities are characterized by long and unpredictable sales cycles and the performance of this business might have an uneven pattern.

To conclude, we are satisfied with our performance in Q4 and in 2010. We continue to execute on our strategy and enhance our profitable growth.

We are entering 2011 with a record backlog, a comprehensive product portfolio and multiple growth engines across our businesses. We expect continued shift from infrastructure to business applications, organic and nonorganic expansion of our product offering and enhanced synergies and mutual benefits between business units and regions.

Furthermore, we will continue to pursue acquisition opportunities in order to enhance our market position, product portfolio or technological capabilities. We believe today's announcement demonstrates our ability to identify attractive targets across our markets of operations.

In 2010 we also emphasized synergies between our business units. We aligned our field operations, created joint product offerings, improved our systems and infrastructure and revamped our brand and tagline to represent all three businesses.

We will continue making efforts in this area in 2011 as we believe that a higher level of integration, knowledge sharing and alignment will enable us to increase revenues and improve our performance. I thank our team for their execution during the quarter and the year and we will now turn the call over to Dafna Gruber, our CFO.

Thank you, Zeevi. I am pleased to provide you with the analysis of our financial results and business performance for the fourth quarter and full year 2010 and our outlook for the full year and the first quarter of 2011. I'll also discuss the financial details of the CyberTech acquisition we announced earlier and the stock repurchase plan.

Revenues for the fourth quarter reached $187 million, increasing 15% from $163 million in Q4 2009 and representing a new all-time high for the Company. For the full year, our revenues increased 18% over 2009, reaching $695 million.

We ended the quarter with a record backlog which equaled more than two quarters of revenues. Our book to bill ratio was greater than one in the fourth quarter as well as for the full year.

Our revenue by businesses were as follows --

Enterprise revenues reached $147 million in the fourth quarter, increasing 19% over last year and accounting for 78% of total revenues. For the full year, Enterprise revenues reached $528 million, increasing 20% from 2009 and accounting for 76% of total revenues.

Security revenues reached $40 million in the fourth quarter, accounting for 22% of total revenues in the quarter. In the full year, Security revenues of $167 million accounted for 24% of total revenues.

By geography --

The Americas region continues to perform well. It accounted for $116 million in the fourth quarter and $433 million in the full year, increasing 18% over the full year 2009. The region represented 62% of total revenue in both the quarter and the year.

Our business in Europe, Middle East and Africa had revenues of $50 million in the fourth quarter and $185 million in the full year, increasing 21% over the full year 2009. EMEA accounted for 27% of our total revenues in both the quarter and the year.

The business in Asia Pacific continued to improve and its revenue for the fourth quarter and full year were $21 million and $77 million respectively. Revenues in APAC grew 15% in 2010 and represented 11% of our total revenues in both the fourth quarter and the full year.

Product revenues accounted for 47% of the total in 2010 and revenues from maintenance accounted for 34%. The balance was generated from professional services.

Q4 gross margin reached a record high, increasing to 66.1% from 63.2% last year. The improvement was a result of a favorable product mix as well as continued increase in the recurring maintenance business. Full year 2010 gross margin was 65% and we expect to maintain a similar level of gross margin in 2011.

The increase in operating expenses in Q4 is mainly in sales and marketing expenses and reflects sales commission and other end-of-the-year provisions resulting from the strong bookings and overall good results in 2010 and specifically in Q4. Operating income in the fourth quarter reached an all-time high of $35 million or 18.6% of revenues. For the full year, operating income reached $123 million and 17.8% of revenues which is an increase of 19% over 2010.

Our midterm target is for an operating margin of 20% on an annual basis. In our model for 2011, we assume at least 25% operating margin on incremental revenues.

Our financial income in 2010 was $8.5 million, up 10% from 2009. We expect a similar level of financial income in 2011. Our tax provisions were $20 million, up 30% from 2009.

All of the above resulted in a 17% increase in net income for the full year from $96 million in 2009 to $112 million in 2010. Net income for the fourth quarter reached $33 million.

Earnings per fully diluted share reached $0.51 in the quarter and $1.75 for the year.

Cash flow from operations continued to be very strong and we generated $44 million in the fourth quarter or $145 million for the full year. Our cash and equivalents reached $663 million at the end of December with no debt.

As discussed earlier, our management and Board of Directors decided on a buyback program of up to $100 million worth of NICE shares. We will execute on this program from time to time in the open market or in privately negotiated transactions from our available cash balance. We will determine the timing and amount of any repurchases based on our evaluation of market conditions and other factors including alternative investment opportunities in our future growth.

Earlier today we announced our plan to acquire CyberTech for a total cash consideration of approximately $60 million. We expect the deal to close in a few weeks. The acquisition is expected to add approximately $25 million to NICE 2011 non-GAAP revenues and to be accretive to its non-GAAP fully diluted EPS, adding about $0.03 to $0.04 for the full year. More specifically, we expect $0.01 to $0.02 dilution in Q1 on $1 million to $2 million of incremental revenues. We expect no impact on EPS in Q2 and accretion starting in Q3.

Turning to guidance, we are introducing today our guidance for the first quarter as well as for the full year 2011. Our expectations include the impact of the CyberTech acquisition assuming closure in early March and do not include the impact of any stock repurchase.

We expect revenues in the first quarter to be in the range of $179 million to $183 million. As for earnings per fully diluted share, we expect a range of $0.43 to $0.47 for the first quarter. We expect revenues in 2011 to be in the range of $775 million to $800 million and earnings per fully diluted share to be in the range of $1.96 to $2.06 next year.

This concludes my comments. I would now turn the call over to questions. Operator?

(Operator Instructions) Paul Coster, JPMorgan.

I wonder if you'd be kind enough first of all to give us a little bit of color around the Actimize business in particular and to what extent you feel the regulatory environment is still driving growth and for how long there.

I think this became clear in our script. We are seeing a very strong momentum in the Actimize business and very strong growth - a trend that we believe will continue.

The regulatory environment is part of the reason for this growth. People are out there dealing with the regulators. We have for instance during the quarter, we had at least one sale that came after an audit. So this is a sign to a regulator within our business. And we also when we are looking at the business, people are preparing themselves for the regulatory waves that are coming over. And we are seeing business with existing customers as well, that are increasing their compliance abilities.

Is there any evidence in the sort of government sector of a slowdown or any caution in the manner in which state and local governments are spending at the moment given this budget issue that sort of applies to North America and Europe?

If we're looking at North America and the business on the security side, we saw an improvement in Q4 over Q3.

Okay, tax rate for 2011, Dafna, can you share that with us please and can you just confirm that the guidance is a pro forma EPS guidance?

Yes, the guidance is pro forma EPS guidance and the target tax rate for us is to range between 17 to 18%.

Daniel Ives, FBR Capital Markets.

Good quarter. Question in terms of cash and obviously there's a strategic change, right? You do an acquisition, buyback. So, Zeevi, just talk about philosophically are there really no more bigger deals out there? Is this kind of a philosophical change? Just talk about the catalyst there.

No, we have a healthy pipeline of large deals but also medium-sized and small deals and we are actively looking at acquisitions. But we are generating cash in a very fast and rapid way and we are confident in our ability to continue to generate cash in the future.

And when we looked and our Board - we said all the time that our Board is looking for the right utilization for our cash, it has been discussed at the Board - and with the strong cash that we have and the strong -- and our confidence in our performance in the future, we decided that this is the right time. But as I said, we are going to continue to look at acquisitions and large ones as well.

Okay and just talk about on the security business, like in terms of bookings like what you're seeing there in terms of sales cycles, deals and just geography-wise where you are seeing your strength in terms of -- for 2011 pipeline?

When we look at our security business, the security business grew mid-teens year over year which is in line with our model. We are also hoping for an upside to beat this number which didn't happen this year.

But overall we are -- the growth is within our model. When we are looking at the pipeline, we have a very strong pipeline which is around our innovative solutions. Will it be our situation management? Will it be our location tracking solutions? Will it be our satellite offering? Will it be our video analytics?

And we are continuing, we are seeing strong demand and there is a certain unpredictability in this business as it comes to government spending. There is an uneven trend.

Got you, thanks.

Shyam Patil, Raymond James Associates.

Good quarter. Just on the organic growth rate for 2011, it looks like it's about a little bit under 10%. Can you just talk about how we should think about that in the context of kind of the long-term stated goal of mid-teens?

Yes, first of all we gave a range and as we all know it is the beginning of the year and usually in the beginning of the year we are trying to be conservative. And even if you look back at what happened in 2010 and if you look back, our initial guidance for the year was much lower than our end results.

And the guidance, I'm talking the midpoint, will range -- we're talking about low double-digit growth at the high end of the guidance. And I believe that's the right place to be given the fact that we are in the beginning of the year.

Got it, okay. And then maybe another question on Actimize. Could you talk about the new verticals you guys have expanded into since the acquisition, kind of maybe an update of how you're doing there? And any other new areas that you see as kind of addressable for Actimize in the next couple of years?

when we are looking at Actimize, our main focus and our main growth opportunity within Actimize is within our customers. We have a product approach which is based on a single platform - multiple products based on a single platform - which means we can expand very rapidly and cross-sell and up-sell when we are installed within a customer.

And this is basically our largest opportunity. This is where most of our focus is and we have a lot of room to expand within this part of the market.

We are investing in innovation. We are coming with new solutions and there is a constant demand for new solutions as there are more -- are more threats. And we are -- because we are based on -- we have one, a product approach and secondly - we are based on a single platform, it's very easy to install and the TCO of new applications is very attractive.

This is where -- this is the main focus of our growth. On top of it, we are growing more -- we are growing and expanding our presence outside the US in EMEA and in APAC, and we are also starting -- actually started last year to look at the mid-sized banks and local banks, regional banks in the US. So we are also looking at segments that are below our traditional segment. In addition, in 2010 we started our activity in the energy trading and we had the first deals and we believe that we'll get additional business during 2011 from this segment.

Daniel Meron, RBC Capital Markets.

Congrats on the strong execution. The first question, can you provide us with more info on the integration of CyberTech. I think there are some small/medium business products that you guys have, and how we should think about that business or the integration of those products together and where do you see overlap between your segments and where do you see differentiation between the two companies? Thank you.

This is Eran. The products are fairly complementary. There are certain areas where there's some overlap. But by and large, they serve some segment niches of the market where our products did not cover as well. And so we view the two product lines going forward and continue to invest in both product lines so that our market coverage improves.

More specifically maybe both in emerging markets and in compliance recording, we are seeing the possibility to expand our market presence and market share.

Okay, can you provide us with more color on the regional focus and the product focus between Enterprise and Security for CyberTech?

Generally CyberTech is more focused on the European market. They have relatively strong presence in APAC. Now this is the -- this will be the focus going forward.

Okay, and then the up-sell opportunities for this business? I understand this is more of an entry-level solution. We have known CyberTech for a while, so just curious if you see further upgrade cycle there and in what kind of growth do you think that this business on a stand-alone basis given the regional exposure it has and the opportunities for cross-sell can generate to NICE? And I understand this is small in the grand scheme of things, but still trying to understand this piece a little bit better.

CyberTech was growing in the past year faster than us on the Enterprise side. On the other hand, it was less profitable than our business. It is still a much smaller business than ours and the way we look at it is as a combined business. So we believe that at the end, it will really have a positive impact on our growth, small positive impact on our growth in our Enterprise business and we will bring the CyberTech business to our operating income model.

Okay, then last question for me. Can you provide us with more regional color on what you're seeing as far as the business trends across regions in the business zone and Americas versus other regions in general?

Q4 is traditionally a very strong quarter in America and this was the case also this time. There is a seasonality here which influenced more the America than other regions. Although we saw a strong quarter across the board if compared to the previous year. And, as we said, we're quite pleased with our ability to -- the improvement that we saw in APAC. One area that we are across the board pleased with throughout 2010 is the number of large deals within the Enterprise business, the number of deals that are above $1 million and this increased almost 50%, 48% year over year and this is a very big encouragement for us.

Thank you, good luck.

Brian Ruttenbur, Morgan Keegan.

Good quarter. I wanted to focus in a little bit on the Security revenue. Can you talk about your plans for growth in Security specifically? And is it going to be international? Is it going to be US domestic? And why not make acquisitions in the Security space? And if you'd just talk about the outlook there.

So we'll start from the last question about acquisitions. We are actively looking at acquisitions also that fit our strategy also within the Security sector. So, once we find the right candidate etc. we will not be shy to -- see the right target, we will -- and it will be the right opportunity, we will acquire a company there. Earlier during the year, we acquired Orsus. And also by the way, CyberTech that we announced today is a relatively small public safety business that we will enjoy.

When we look at the Security overall, we believe that our growth is coming from our approach to provide innovative solutions. On the physical security side, it is our Situator, situation management for physical security, this is something that we introduced early in 2010 and we created very good traction in the market.

This is -- we have already many deals in 2010 and we believe that this is going to -- we're going to see accelerated growth in this business in 2011. We believe also that there are benefits of our video offering and our Situator offering are complementing each other and while in some cases the buying decisions are joint, in some cases they are separate and we are -- we are technology-agnostic in our Situator, there is the -- people are buying for the vision and the unified vision and the operation is something that is compelling to many customers. We are seeing this trend happening. This is on the Surveillance side. When we are looking at the Intelligence part of the business, we believe that the other -- again our technology in the IP space, in the location tracking and in the satellite communication is a differentiator, a key differentiator and there are key needs and I believe that we will see major growth in this business in 2011.

Can you talk about percentage growth that you expect to see from these levels over the next two to three years?

No, our model is to look at all businesses on both Enterprise and Security to see growth on mid-teens. This is our target we have and we believe that there are upsides in both businesses.

So you don't see Security growing any slower than the Enterprise?

I mean, as I said, the model is -- over time the model is to have mid-teens growth in both segments and there are upsides in both businesses and we believe that there is a big upside in Security.

Thank you very much.

Jonathan Ho, William Blair.

Good morning, great results. You know, my first question is on CyberTech. Can you talk about the distribution channel model there and whether this broadens your channel reach for your existing solutions?

Yes, CyberTech was primarily focused on indirect channels that helped it spread globally in emerging markets and in many different countries in Europe. We think we can benefit from their distribution network and that is part of the value in this acquisition.

Okay and then just touching on the lower margins with CyberTech, is this because there's a higher hardware component than your traditional business and would you expect those margins to eventually reach your core?

Let me just clarify, CyberTech does not have lower gross margins. Gross margins were fairly much in line with our business. The lower profitability had to do with scale of the business and of course the overhead that any company needs to maintain at any size. So that's why we believe that putting the two together will bring it closer to our traditional margins.

Talking a little bit about the competitive landscape for Actimize, with the recent acquisition of one of your large competitors, do you see some incremental opportunities in that space?

Always an acquisition creates some turmoil in the market which means that we will be able to -- there are also always opportunities when a competitor is being acquired. Having said that, I think that against this specific competitor, we performed really well over the past few years and we believe that we will continue to do so.

David Kaplan, Barclays Capital.

Two questions. First of all on CyberTech as well, just if you could clarify. You mentioned earlier that CyberTech was growing faster and the margins you said where there was some improvement which you just touched on a second ago. Is the growth related to the size of the company or the business that they are in?

It's more related to the size of the company.

Okay, and so you see this as being -- as synergies mostly within the Actimize space? Will it be integrated with Actimize or will it be run in a different part of the business?

CyberTech will be integrated with our Enterprise business, the Customer Interaction business.

Okay and then secondly, can you give us some more color on the growth in emerging markets that you talked about and which of the product lines are -- do we see most of the interest from emerging markets coming from?

We are seeing an increase in our business in emerging markets across the board. This is through our entire product lines. It is -- by the way, so there is no -- it comes -- we're seeing growth in opportunities in Eastern Europe and we see growth in APAC and we see growth in Latin America.

So is it then safe to assume that the rate of growth in each of the businesses that you mentioned earlier are equal across the globe or are again, there's no particular areas that's growing faster in emerging markets?

I don't have the -- I didn't look at this. It might be that you know a certain business is growing faster in Latin America and another business is growing faster in APAC. But generally there is growth in all emerging markets for our business.

Michael Kim, Imperial Capital.

Could you talk a little bit about the pipeline for Situator in specific verticals especially critical infrastructure and public transportation? And from a geographic perspective if you are seeing a stronger pipeline in the US market or Middle East or other geographies, thanks.

So we are targeting the Situator in the transportation segment, in the utilities segment and in the financial institutions segment. In all the three segments, in the utilities, demand is coming from, in the US, from the NERC compliance and the NERC regulations and the need to be compliant to NERC and we believe that we are providing a unique solution for utilities companies to be compliant with NERC.

On the transportation and mass transit, if it's airport, if it's mass transit, if it's a seaport, this is again the -- it's mostly because of the security risks and some regulations. And here again we are focusing on the larger end of the market and trying to penetrate airports, seaports and mass transit. We announced a couple of deals and we still have a healthy pipeline in this domain as well.

In addition, we are targeting the financial institutes and this is where we are leveraging our relationship in both our Actimize business in the Customer Interactions and we have -- we believe that the solution combined with for example the Actimize solutions provides a better protection against fraud at organizations and will help them to secure the business.

And from a competitive standpoint, are you seeing any change in the landscape or is it coming from other piece-in companies or VMS companies or other video surveillance with analytics? Where are you seeing the strongest levels of competition?

All of our markets are competitive. We don't see a major change in the competitive landscape over the past year or so. I mean the same trends are there.

With security, I think you talked a little about some large opportunities that could potentially provide some upside. Can you talk a little about where some of those opportunities might develop over the course of the year and if it's your sense that that will be a 2011 event given that you're looking as an opportunity in 2010?

We have a good security pipeline that is built and this is again -- it's in developed countries as well as in emerging markets. And the predictability of when this pipeline will materialize is quite low and we believe that some opportunities will happen in 2011.

Great, thank you very much.

ari Bensinger, Standard & Poor's.

Can you provide some color on the linearity of the quarter? Month to month how is business trends? Do they improve as the quarter progressed or stay relatively the same?

We don't break these numbers on a monthly basis, but we can say that they are traditionally on the fourth quarter as the year is coming to an end in December, our sales people are working very hard to complete the year in a nice way and there is a clear milestone. And therefore usually December is a very strong quarter. December is a very strong month, not a quarter.

Sure. Can you talk a little bit about services? It seems to be leading the way in terms of growth. And also what was your maintenance percentage mix during 2009? And do you expect this particular segment to continue to increase as a percentage of sales in 2011?

In 2009 the percentage of revenues was smaller. It was about 1 to 2% lower. And overall over time we expect maintenance as a percentage of revenue to gradually increase.

And services is becoming more of a requirement for your customers given the complexity of your solutions and they're becoming a little bit more complicated?

We are -- when we are looking at the professional services, as we move through software solutions, in order to sign the -- there is an expertise that is needed in some of the implementations and we are providing the necessary professional services to our customers. So the -- but most of the sales improvement in services is coming from -- or growth in services is coming from recurring maintenance revenues.

There are no further questions at this time. Before I ask Mr. Bregman to go ahead with his closing statement, I would like to remind participants that a replay of this call is scheduled to begin in two hours.

In the US, please call 1-888-326-9310. In the UK, please call 0-800-917-4256. In Israel, please call 03-925-5930. And internationally, please call 9723-925-5930. Mr. Bregman, would you like to make your concluding statement?

Yes, thank you. Thank you all for joining us today and have a nice day. Thank you.

Thank you, this concludes the NICE Systems fourth-quarter 2010 results conference call. Thank you for your participation. You may go ahead and disconnect.