Morgan Keegan Downgrades NICE Systems (NICE)

Analysts Brian Ruttenbur and Peter Kostiuk of Morgan Keegan downgraded NICE Systems (NASDAQ: NICE) to Market Perform. This is based on the recent news that Avaya, NICE’s largest customer, intends to develop its own enterprise solutions software instead of relying on NICE. This could impact NICE’s topline in 2010 by $7-$10 million. Therefore, they have lowered their 2010 and 2011 estimates to $1.68 and $1.99, respectively.

If other customers choose to internally develop software or if Avaya chooses to market their own analytics software it could become a much bigger negative to NICE.

Shares of NICE are currently trading at 19.9x estimated 2010 pro forma EPS of $1.68 and16.8x estimated 2011 pro forma EPS of $1.99. We do not see significant upside from these levels given the risks facing the company, and are therefore downgrading their rating on shares of NICE from Outperform to Market Perform.