"Loronix Acquisition Left NICE Gasping"

Comverse/ Infosys is considered to be the shy little sister of Comverse Networks Systems. The latter is responsible for generating 85% of Comverse's revenues, and therefore draws most of the attention. Its little sister is remembered mainly in connection with its rivalry, or possible merger, with NICE. Now it is clear that rather than a merger, a bit of a war is being waged.

Comverse/ Infosys is run by Dan Bodner, and deals in one of today's hottest fields - Customer Relations Management (CRM). The company began by developing communications data, voice and fax digital recording equipment for the defense and intelligence sector, and has since transferred its focus to the telephone support centers in the civilian market.

Dan Bodner has a clear vision regarding all aspects of the division he manages. "Our basic technology is recording, but we are now developing data capabilities. The CRM market is a large and growing one, but the potential lies beyond the contact center, on which NICE focuses. We take a wider perspective of customer contact points, enabling the organization to collect information from all kinds of sources, which then sits in the CRM without being properly utilized. We therefore operate Customer Experience Suite (CES), an application that enables information to be collected from different sources and also carries out the relevant sorting for the organization.

As part of its attempts to penetrate the field of customer support centers, Comverse/Infosys acquired the US company Loronix last March for $224 million in shares, an acquisition that was completed last week. Loronix provides video data management systems.

The acquisition signaled NICE that Comverse had decided to lock horns with them. Loronix's product is similar to NICE's NiceVision, but preceded it to the market by a good two years. The time difference shows up in sales: Loronix had $37.5 million in sales in 1999, compared to NiceVision's single digit millions. The spice in the story is that NICE and Comverse are believed to have run a tight race to acquire Loronix.

In any event, when Loronix fell into Comverse's warm embrace, NICE began to make faces. "I have a personal problem. I cannot understand Comverse's business strategy regarding Loronix," NICE president Benny Levin told "Globes" at the time.

Despite the Loronix acquisition, rumors continued to float in the air of a possible merger, which gained force when NICE split into three divisions. Rumors told of a possible merger between Comverse/Infosys and NICE's customer service division. The rumors were (again) denied by Levin and Comverse president Kobi Alexander.

"Loronix was a natural choice for us," said Bodner, "because they have a clear lead in the market, with handsome sales and a 40% market share. The idea behind the acquisition was to complement our product line in the field of video, in the wake of our development of data and voice information collection technology. In a few years, video will be an inseparable part of inter-organizational communications, and a great deal of commerce will be handled by video."

"Globes": How much overlap is there between your and NICE's product?

Bodner : "About two thirds of our business overlaps NICE's, and NICE is unquestionably our chief competitor. However, NICE has only $4 million worth of sales, and it does not seem that its expectations that speak of sales identical to ours in 2000, will be realized."

It seems that NICE did not really like your acquisition of Loronix.

"As they say, it's not personal, it was only business. NICE found it hard to digest acquisition Loronix [by Comverse/Infosys] and they are stuttering after the deal. Today, I know that the reason was the negotiations between us and Loronix. All the signs showed NICE was sure it would buy Loronix right up to the bell, and they are rather disappointed at having lost. The guys at NICE are now beginning to say that they were never interested in Loronix and the acquisition was not on their agenda, when everybody knows that this was not true."

NICE claims that they will overtake Loronix.

"Our analysis and calculations with Loronix's people show that they are a year behind us in technology, maybe a year and a half. Moreover, Loronix is positioned in entire markets where NICE simply does not exist."

Salomon-Smith-Barney analyst, Victor Halpert recently issued a special report on the digital video market that naturally mentioned NICE and Comverse. Halpert wrote that his assessment is that service centers are the largest sector of the data recording and retrieval industry. He determined that NICE was the market leader with 23% market share. Halpert's evaluation was that Comverse led in the less attractive market - the field of security recording by government authorities and intelligence services.

The report's main highlight touched on NICE's communications split, in the framework of which it introduced its Customer Experience Management (CEM) strategy, offering overall integration of of customer contact management on a single platform. In Halpert's opinion, the new strategy will place the company in an even better position in the CRM market, with CEM becoming the leading standard in the contact centers market.

Dan Bodner disagrees with the report. "Victor Halpert has praised NICE for quite a few years now. I told him that I can only regret the figures, because the information is simply incorrect. After all, NICE does not publish its figures for NiceVision. However, NICE is a public company and I assume that because the analysts know it far better than they do Comverse/ Infosys, this creates a preference in their direction, while we are punished for our 'no comment' and our lack of transparency in the market."

You are in fact saying that you are leading in the recording field?

"From our perspective the most interesting and important market is the customer centers, the call centers, which we dominate. All in all, if you look at the whole CEM idea that NICE presents, you will easily be able to prove that it is merely a version of our CES strategy that we presented in February, and I told Victor Halpert this.

"Pay attention to another fact: We have exclusive agreements with Nortel and Siemens to provide customer center technology. In addition there are a number of giant companies in the CRM field that distribute our product. Look at NICE. They always crow that they are working with Lucent, but in truth, they do not have exclusivity.

Goldman Sachs assessed that the acquisition of Loronix is a step toward an issue by Comverse/Infosys.

"We did not found Infosys in order to change the name, but in order to build a framework for a public issue. The plan was around during the time of Carmel Vernia (former Comverse/ Infosys CEO and current Chief Scientist at the Ministry of Industry and Trade - Z.P.). As for the timing of the issue, it has not yet been determined, but we certainly intend to exploit the momentum of the market as well as Comverse's excellent positioning."