NICE-Systems Ltd. (NICE)

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Nice Systems won't confirm, or deny, report that it's buying Witness
14.9.06 | 12:34 By Omri Cohen
Nice Systems (Nasdaq: NICE) is not denying rumors that it's positioning to buy rival company Witness Systems (Nasdaq: WITS). Naturally, it is not confirming the rumors, either.

"The company does not comment on rumors," it commented unhelpfully to the Tel Aviv Stock Exchange, after a report in Yedioth Ahronoth that it's about to buy rival company Witness for more than $750 million, in a stock and cash deal. That would be a huge, material acquisition for a company whose market cap on Nasdaq is $1.32 billion.

Pressed by TheMarker, the Nice spokeswoman refused to comment. The company's chief financial officer Ran Oz repeated that Nice doesn't comment on rumors, and sought to stress the mistakes that had appeared in the Yedioth article in respect to Nice's business.

"If we have anything to say, we say it," he said. "We run our business and don't respond to speculation. It seems that whoever wrote the article doesn't understand the business," Oz added.

When silence speaks volumes

Non-denial is also a response, sometimes. Two months ago msystems (Nasdaq: FLSH) CEO Dov Moran wiggled out of questions about an imminent merger, and indicated that msystems would remain independent. But he did not explicitly deny the report and shortly after that interview, msystems was bought by SanDisk.

Is here any evidence beyond Nice's non-denial? Yes: one is Nice's aggressive acquisitions policy, and another is its poor record for transparency when it comes to material issues.

Regarding the aggressive acquisitions policy, two months ago Nice, which develops voice and video recording systems for security and customer-service purposes, bought IEC of Richmond for $200 million cash. IEX sells software for manpower management, strategic planning and more. At the same time Nice bought a smaller company, Performix of Massachusettsm for $13.2 million.

Raising money - what for?

As for the transparency issue, Nice has been assiduous about reporting material developments, after the event. But a claim could be made that it's cagey with the whole truth in advance.

For instance, last year CFO Oz was asked about the company possibly raising money: rumors were running rampant. He said that nice was a profitable company with cash flow, and therefore would need a good strategic reason to raise money in any way. "We won't raise money just to sit on a mountain of cash," Oz stated, and lo and behold, three weeks later the company published a shelf registration to raise up to $220 million. In December it raised $213 million.

No, the law does not require Nice to respond to rumors. It doesn't have to answer questions from reporters or the stock exchange. But if it really is maneuvering to buy Witness for $750 million in stock and cash, it would be hugely material to Nice. Its laconic response is far from convincing.

Witness' market cap on Nasdaq is $580 million, after having lost 12% of its value this year. For the first half of 2006 Witness reported a 22% increase in revenues to $106.3 million, and profit of $6.9 million. In the first half of 2005,it had lost $8.8 million.

Incidentally, Witness is delinquent in its regulatory filings and faces potential delisting from Nasdaq. On Wednesday, yesterday, another class action motion was filed against it, for alleged misrepresentations to shareholders based on a stock options scandal.

http://www.haaretz.com/hasen/spages/762764.html