The falls on world stock markets earlier this year led to a sobering up on the part of investors about the values of many technology companies. The Nasdaq was down over 30% in June, but since then the trend has changed, and it is now just 17% below where it was at the beginning of the year.
For all the turbulence, the business of Nice Systems (Nasdaq: NICE; TASE: NICE), headed for the past eight years by Barak Eilam, has been stable. Nice Systems is a veteran Israeli technology company that develops systems for prevention of financial fraud and for customer relations management.
Still, even Nice Systems has been affected by the negative sentiment towards the technology sector. Since the beginning of this year, its share price has fallen 21%, and it has lost its status as the most valuable company on the Tel Aviv Stock Exchange. Its market cap is NIS 49 billion, NIS 7 billion less than that of Bank Leumi.
Nice Systems’ second quarter results show the company as the responsible adult of the local technology sector. Quarterly revenue grew 16% to $531 million and net profit on a GAAP basis shot up 45% to $65.6 million.
For the first half year, revenue was $1.06 billion, and net profit rose 27% to $123 million. The company raised its guidance for 2022, and it now sees revenue totaling $2.17-2.19 billion for the year. Previous guidance was $2.16-2.18 billion. Non-GAAP fully diluted earnings per share are now expected to be in a range of $7.33 to $7.53, which compares with a previous guidance range of $7.25 to $7.45.
Despite the results and the raised guidance, Nice Systems’ share price fell by 4.14% in Tel Aviv today, and it is currently down 3.19% in New York.
Summing up the quarter, Eilam says, “What characterizes Nice is that whether the markets are up or down, we’re stable. Our solutions are mission critical for our customers, so they want us in any situation.”
How has Nice Systems been affected by the turbulence on the market?
“We have suffered less from the declines that have taken place this year, and it’s not only the investors who have benefitted; the employees have too. While dreams have been shattered in many other technology companies, Nice’s employees, every year in recent years, have redeemed shares to the tune of about $200 million. This is not virtual paper but real cash that goes to their bank accounts. This year too, I estimate that the employees will realize shares amounting to some $200 million.”
What are your conclusions from the end of the free money era in technology?
“The current situation will teach the technology world that while growth is important, companies also have to generate profits. I think that, looking ahead ten years, the present situation will help the industry.”
Eilam says that Nice Systems could exploit the sharp falls in many technology stocks. “One of our advantages is that we have $1.5 billion cash. In our ecosystem, most of our competitors have high debt and little cash. This creates a competitive advantage for us.”
Published by Globes, Israel business news – en.globes.co.il – on August 18, 2022.
© Copyright of Globes Publisher Itonut (1983) Ltd., 2022.
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