NICE hosted an Analyst Day event in NYC yesterday. Our overall takeaway was positive. Management tone was optimistic and financial targets were reiterated. NICE continues to benefit as enterprise customers experience increased contact center call volume and stricter requirements to conform to compliance and regulatory mandates. NICE's security solutions are benefiting from investments in homeland security infrastructure globally. NICE is an Applied & Emerging Tech Monthly Top 3 Pick. Maintain Overweight.

· The Enterprise segment (~75% of FY09 sales) addresses an estimated TAM of ~$25 billion. The industry is being driven by a significant increase in the amount of interactions now including social media, web chat, and SMS. NICE believes the volume of interactions doubles every 2.5 years. The fundamental driver of the success of NICE's enterprise solution is the ability to provide enterprisewide (enabled by VoIP and virtualization), multichannel, real-time view of interactions and transaction activity inside an enterprise. NICE has a leading market share in contact centers and trading floors.

· Actimize is expected to contribute more than $100mm in revenue in 2010, driven by increasing financial regulatory pressure, increasing transaction volumes/speed, and a greater focus on bank risk management. Actimize has relationships with all of the top 10 global banks. The majority of growth is expected to come from existing customers as banks standardize on one platform. NICE believes the Consumer Protection Agency, currently being considered in Congress's financial reform bill, could generally be an additional growth driver for Actimize.

· NICE is evolving its channel strategy; direct sales to large-enterprise customers, channel partners for reaching the SMB market. A key channel partner for the Actimize business is FIS, which has relationships with 14,000 financial institutions globally.

· The Security segment (~25% of FY09 sales) is benefiting from several key trends, including providing real-time response, regulatory/compliance requirements, a large investment in transportation infrastructure, a shift to next-gen 911 systems (w/IP, voice, video, and data), large-scale deals, and a move toward identifying targets from simply tracking known targets.

· The $69mm FAA IDIQ contract is slightly less than 50% complete. 400 of a possible 850 systems have been delivered. NICE is delivering ~50 systems per quarter. Other large-scale projects include the $55mm government intelligence agency contract, the $20mm NYC 911 contract, and the $20mm Safe City project in Macedonia. Momentum continues to build, as shown by the $5mm contract for the Indian Parliament House announced on 5/24 and the Port of Los Angeles contract announced last week.

· Financial targets reiterated. NICE reiterated FY10 guidance and targets midteen organic growth the long term. More than 80% of growth is expected from the existing customer base and ~35% of revenue is from maintenance, providing good visibility. NICE has $565mm in cash with no debt. M&A remains the primary use of cash.

· Small acquisition announced. NICE announced the acquisition of Lamda Communication Networks for several million dollars. The deal will allow NICE to integrate the ability to capture satellite generated information (phone calls, SMS, etc) into its existing Security solution. The deal will not materially impact FY10 financial results.

· Maintain Overweight. Our December 31, 2010, price target remains $38.50, based on a multiple of 18x CY11E PF EPS of $2.14. The multiple is close to the P/E reached in 2005-07 but is still a slight discount, reflecting our view that there's still some risk in the enterprise end-market but that the cyclical slowdown in enterprise IT spending does seem to be abating.