Revenue for the third quarter of 2004 was a record $US63.5 million, up 14 per cent from the same quarter of 2003 and up 4 per cent sequentially due to continued strong sales to enterprise customers and better traction in the public sector markets including video surveillance, public safety solutions, and lawful interception.

<?xml:namespace prefix = o ns = “urn:schemas-microsoft-com:office:office” />

Net income increased 48 per cent to $US5.2 million, or $US0.28 per fully diluted share, compared with $US3.5 million, or $US0.21 per fully diluted share in the third quarter of 2003. EPS increased 17 per cent sequentially.

Commenting on the quarter, Haim Shani, president and CEO of NICE, said, “We again achieved record revenues and we were particularly pleased to see that we are beginning to get some traction in the public sector where revenues were up 18 per cent year over year and up 17 per cent sequentially.”

Gross margin increased to 54.7 per cent from 53.0 per cent in Q3 of 2003 and 54.3 per cent in Q2 of 2004, primarily due to increased volume.

“As planned, we continued to spend on our key strategic initiatives, including the launch of NICE Perform,” continued Mr. Shani. “Even with this continued investment, we were able to substantially increase our operating profit.”

The company reported a Q3 operating profit of $US5.1 million, up 118 per cent from $US2.3 million in the year earlier period, and up 31 per cent from $US3.9 million in the second quarter of 2004. Operating margin increased to 8.1per cent from 4.2 per cent in Q3 of 2003 and 6.4 per cent in Q2 of 2004.

Total cash and equivalents at September 30, 2004 rose to $US146.0 million, compared with $US135.8 million at June 30, 2004. DSO for the third quarter was 68 days, at the low end of the target range.

“Demand for VoIP products remains strong, also contributing to our growing orders. During the quarter NICE filed a lawsuit against Witness Systems seeking an injunction preventing the sale by Witness of any solution which infringes NICE’s VoIP patent.

Witness has, in retaliation, filed a patent infringement suit claiming that NICE has infringed two of its patents relating to screen capture. We believe the suit is without merit and will defend ourselves vigorously against this retaliatory claim.”

Commenting on the outlook, Mr. Shani said, “Similar to last year, we expect a very strong fourth quarter. We continue to experience strong bookings with over a 1:1 book to bill ratio, and we were gratified that Q3 bookings included 8 deals for our new NICE Perform suite which was launched at the beginning of the quarter. No revenue from these deals was recognized in Q3.

“We reiterate our guidance for the year, and expect revenues in Q4 to grow to between $US67 million and $US70 million, with EPS between $US0.44 and $US0.49. 2005 promises to be another year of growth in both the enterprise and public sectors with excellent operating leverage that will enable our EPS to grow substantially faster than revenue,” continued Mr. Shani.

“Our preliminary guidance for 2005 calls for revenues between $US275 and $US280 million and EPS of $US1.40 to $US1.50.”