Word of an Apple deal with Nuance may have gained momentum early Saturday as hints have emerged that a deal is underway. Rather than the previously dismissed buyout, Apple would forge an agreement to bring Nuance’s voice recognition system into iOS, most likely iOS 5. While options were open, TechCrunch understood that the determination of Nuance chief Paul Ricci and a high valuation dependent on licenses were likely deterrents to buying Nuance outright.
The system would almost certainly be used to improve the range of commands and the accuracy of voice recognition in iOS 5. Nuance is well known for its Dragon Dictation system and powers the voice systems of many mobile apps, including Apple’s recent acquisition Siri.
Apple was already known to be recruiting speech-focused developers, which most took to mean a self-developed voice system. A pact with Nuance could instead leave any new hires focused on integrating Nuance’s systems into iOS rather than repeat much of the work and possibly lag behind Google, often considered a recent pioneer in mobile voice through Android’s Voice Actions.
Pressure from Android might steer Ricci into making a compromise. Without control over voice dictation on one of the most important phone platforms, it may have to turn to iOS out of necessity to keep its technology relevant.
Apple co-founder Steve Wozniak has said that he was “totally wrong” about an apparent acquisition of Nuance Communications by Apple according to a report. Nuance specializes in speech-recognition technology and could potentially be a target for acquisition by Apple as voice-to-text functionality has started to feature on competing handsets such as the LG Optimus 7. In an e-mail to Reuters Wozniak wrote “I thought I’d read about it but obviously got it all wrong”.
Nuance shares spiked to a two year high after a video of Wozniak making the claim was posted by TVDeck.com. After hitting a peak of $19.19 on Tuesday, Nuance shares shed 3.5 per cent to $17.72 after Wozniak retracted his claim.
Nuance currently licenses its technology to a number of Apple’s competitors. Much of its inherent value as a company would be lost in any acquisition by Apple as it would stop the income stream coming from licensing Nuance’s IP.
However, Apple and other companies like Microsoft have been known to acquire companies and shutter them without any signs of their IP appearing in their shipping products simply to stifle competition.
Nuance’s shares had touched a 2-1/2-year high on Tuesday, after TVDeck.com posted a video showing Wozniak saying Apple bought Nuance. Both companies had declined to comment.
“I thought I’d read about it but obviously got it all wrong,” Wozniak told Reuters in an e-mail, when asked what he meant.
Deutsche Bank analyst Nandan Amladi said the video appeared to be boosting Nuance’s shares even as he dismissed the likelihood of such a deal.
“Nuance licenses its technology to many vendors including competitors to Apple. By acquiring Nuance, its value goes down because its competitors would stop licensing Nuance,” he said.
On Monday, Burlington, Massachusetts-based Nuance had posted better-than-expected fourth-quarter results, helped by strong revenue at its healthcare and mobile units.
After rising as high as $19.19 on Tuesday, Nuance stock later pared some gains to trade 3.5 percent higher at $17.72.
Nuance forecast 2011 revenue above expectations and earnings largely in line.
Avondale Partners said the full-year outlook reflects the current trend of strong demand for the company’s products, its mobile design wins and growing acceptance for its mobile technologies.
Gleacher & Co reiterated its “buy” rating on the stock, citing its diversified end-markets, dominant market share position and increasing revenue visibility.