[Beginning of Cramer's verbatim comments for this segment...]

Jim:        Tonight, we're going back to the Homeland Security well... as we try to capitalize on a big theme that's simply not going away... no matter how much we might want it to. We know that governments around the world, especially our government, are lavishing money on defense of the homeland... and we know that private industry is to, as we heard from ArcSight, Inc. (ARST) CEO yesterday... Homeland Security isn't just about protecting people and government resources anymore... it's also about protecting our country's privately-owned infrastructure, including our financial system, nuclear power plants, defense installations, and all of the threats that can come from those... hacking, sabotaging, outright shutdowns...

Tonight I want to focus on data, video and voice analytics... and my favorite play here is... NICE Systems Ltd. (NICE)... a not-so-nice Israeli company... founded in 1986 by seven retired members of the Israeli Army. It's a company that makes the technology for capturing, managing and analyzing all kinds of suspicious communications... phone calls, video, radio and emails.

This may not be as "in your face" as boots on the ground, but it's just as effective....

Now, we have a long history with NICE... I originally recommended this one on March 15th of 2006... at $25.39. It's up 20%. Remember, the market used to be good then... NICE, essentially, is the first line of defense, protecting infrastructure, like bridges, tunnels, power plants, oil and gas plants, and city centers... from physical attacks by detecting intruders and suspicious activity... Before you can catch the bad guys, you have to know who they are and what they're up to. NICE gives us that capacity. And that's why its technologies are used for part of the security profile for things like the Eiffel Tower... for something foreign and spectacular... and for the New Jersey Transit... for something domestic and mundane. Hey, when Beijing built out the subway system for the 2008 Olympics, it had NICE's digital video surveillance solutions deployed across its subway system. Hey, the NYPD uses NICE's systems to manage emergency communications and conduct more accurate incident inquiries. And on the enterprise side... Grupo Santander uses NICE's technology to centralize calls at their call centers worldwide...

There was an article in yesterday's Wall Street Journal about how terrorist groups like Al Qaeda are in their worst financial shape in years, where they're increasingly turning to more traditional criminal activities to raise money... like drug and weapons trafficking, money laundering, fraud, organized crime...

Here's another area where NICE comes in... The Treasury Department says that these activities are accomplished by large movements of cash that could easily be detected by banks and other financial institutions, and appealed to the private sector for helping monitoring suspicious activities... which they would do with the kind of gear, of course, that NICE makes. It's not all voluntary either. At an Interpol assembly yesterday... some major international law enforcement officials called for stricter anti-money laundering legislation as a means to curtail crime and prevent terrorists from raising money... Again, if we get this kind of legislation, it would be huge business for NICE, which is making its move in this space.

In 2007, the company acquired Actimize, a business that develops smart recording systems and transactional analytic solutions that help detect fraud and money laundering threats. Then, just last month, NICE bought Fortek, another anti-money laundering company. I tell you, this is where the action is... It also gives NICE access to top-tier financial clients, whereas before the company had mainly specialized in mid-tier clients... Now the market for this kind of financial crime prevention technology should be worth about $3.75 billion in 2012. I mean, look at these studies... that's what they come up with, okay...

It's expected to grow at a 13% clip... another number they come up with... up from $2.6 billion in 2009. It's only 15% of NICE's business. On top of this, the company has plans to apply these technologies to non-financial sectors, increasing the size of its addressable market, which is what we're looking at. When you say, "addressable market"... how much business is there altogether out there?...

Now, what about the nuts and bolts of NICE?...

Well, we recommended NICE back in 2006 on... This is the basic security stuff that the company relies on for its steady performance... Okay, NICE is a major play on internet protocol video surveillance that combines video recordings with analytics to help detect suspicious things... This is what you've been looking for, right... How about things like unattended bags and intruders? It nails them... It's a play on voice logging... it lets police, fire departments and air traffic controllers handle and record calls to track activities... and re-create the sequence of events to keep everybody on the up and up... and, of course, any crimes and acts of terrorism they try to predict and get from it.

NICE also has a communications interceptions business. This is traditional spy stuff, like "The Man From U.N.C.L.E."... This is an area where the company is relatively new, but it recently won a $55 million contract to supply an unnamed government agency. I might try to guess which one on air, but then they'd kill me...

All of these are businesses that I think are growing... that have strong secular growth trends... businesses and government shell out more and more to protect themselves. That's why, this whole week, is about these companies that are just feeding and feeding and feeding... You need to protect your infrastructure...

That's not the only reason I like it...

There are other companies in this space that do similar things. I'm recommending NICE because it's the best of breed...

In its most recent conference call, NICE management said that it expects a strong pipeline of security deals that should result in better revenue and earnings growth for the company in the 2nd half of 2009... Hey, they report in three weeks, so we'll get a chance to see it the company's delivering on that promise...

A solid competitive edge over Verint... that's one of its main competitors... as Verint's been busy integrating its hard-to-swallow acquisition of Witness Systems... while NICE has kept its head in the game. More... a solid balance sheet. $475 million in cash... $7.70 per share... This is a $30 stock, trading at 17.7 times earnings. It's growing at almost 17%! I don't think that's expensive for a high-quality homeland security tech name like NICE. Although, as with all the counter-terrorism stocks, I think that they make the most sense as a shopping list for when they go down... because the theme is simply not going away... just like the mobile internet tsunami, as anyone who bought Starent Networks, Corp. (STAR) at our suggestion on May 8th, and just picked up an 80% gain in five months, knows all too well.

The bottom line...

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Jim's comments AFTER the interview:     Data, voice and video analytics are the first line of defense... both against physical attacks and financial crimes that allow terrorist organizations to fund themselves....  and the best way to play the space...  NICE Systems Ltd. (NICE).

[verbatim recap]

[end of segment]

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