Samsung Discusses Buying Nuance, Maker of Siri’s Voice Recognition

| Analysis

Nuance Communications, the maker of Dragon speech recognition software and the provider of Siri's speech recognition engine, is thinking about selling itself. Among its suitors is Samsung, and The Wall Street Journal reported the two companies have held talks.

After this news hit, Nuance shares closed higher on Monday at US$18.76 per share, a gain of $1.66 (+9.71 percent), on incredibly heavy volume of 16 million shares trading hand. Average volume was previously just 2.3 million shares.

That sent Nuance's market cap up to $6 billion, and that's before the premium that would be necessary to make a sale happen. While Nuance has reportedly spoken with both Samsung and venture capital groups about a sale, prices haven't yet leaked.

Apple, Samsung, Nuance, and Money

Speculation that Apple could be interested in purchasing Nuance occurred after Apple introduced Siri using Nuance's speech recognition engine. It was just that, however, speculation about what Apple might do versus any king of leaks or other rumor-based stories. Apple wasn't named in Monday's WSJ piece as a possible buyer, but it's difficult to believe Apple would be keen on relying on Nuance technology if it were acquired by the company's chief hardware rival in smartphones.

Complicating a potential purchase by Apple is the fact that Nuance, which had $1.86 billion in revenue during its most recent fiscal year, has both numerous businesses and many customers. Right off the top, Nuance's biggest business is digitizing patient records. It also provides voice recognition to several auto makers, and it owns Swype, the keyboard replacement made popular on Android. Nuance counts Daimler AG, Panasonic, Nintendo, Apple, and Samsung as customers, in addition to many more.

Apple isn't likely to be interested in owning a big chunk of Nuance's product line, and it is even less likely to want to continue selling to third parties—especially Samsung—if it did buy the company. But, and this is a really big but, Apple would be forced to pay for the value of those other things if it did acquire the company, making an acquisition a very tricky thing.

This is part of why all but one of Apple's acquisitions have been limited to a few hundred million dollars. Beats Electronics—the exception at $3.2 billion—cost as much as it did because Apple had to buy a headphone business it may or may not have wanted in order to get the streaming music service and people (Jimmy Iovine and Dr. Dre) it definitely wanted.

So, this leak is very interesting. A key technology used to power Siri—part of Apple's efforts to leapfrog desktop search—may be up for sale. Its bitterest rival—Samsung—may be interested in doing the buying. Apple has been busily divesting itself as much of Samsung's component business as it can, and it's hard to see Apple wanting to be beholden to Samsung for this technology. At the same time, Apple usually buys companies it can quietly absorb.

If Apple wants to buy Nuance, however, it can. Apple can outbid every other company on the planet without even thinking about using its stock for currency.

It will be interesting to see where this goes, but one thing is certain: I so very much hope that if the company does get sold, its incredibly annoying testimonial commercials melt into a celluloid puddle, never to be resurrected.

Comments

BurmaYank

The situation if Samsung buys Nuance might be ironically perfect for Apple. Samsung has clearly shown that if one modern-day company wants to use another’s IP without getting a license or making any encumbering agreements or obligations to do so, it should just go ahead & steal that IP (in this case, Apple should just keep on using Siri w/o paying Samsung for it, if Samsung starts to get too cranky & demanding about Apple continuing to use the current Nuance license), & then just drag the court cases, where the victim sues the thief for justice, on interminably.

Besides, do I recall correctly that Apple bought a bunch of IBM’s voice-recognition IP (which had been state-of the-art at the time), to add to whatever it owned with its Macintalk. All that Apple IP should muddy the judicial waters adequately to stretch Samsung’s suit to stop Apple from stealing Siri off into the decades, at least.

webjprgm

I would be surprised if Apple bought Nuance and continued all its other businesses, just as you said. But Nuance is a major provider of speech-to-text for hospitals so Apple can’t just buy Nuance and kill that part of the business.

Could Apple buy Nuance and then make it an independent subsidiary company? That would keep Samsung from getting it but still keep it separate from Apple proper so it can continue operating as it does now.

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