Nuance has captured the market in the continuous dictation field. IBM, Philips, SpeechWorks, old Nuance, and others lost to history. Microsoft is the only supposed competitor.
Microsoft has been going to have speech in their product line for a decade. It was supposed to have been part of Vista -- remember that debacle of the demonstration that showed up on YouTube? They can only be falling farther behind.
A significant benefit of Nuance's focus on medical is that they have access to massive databases of user experience. Improving the product from this point is not so much a matter of genius programming as it is steady, hard, block and tackle work, identifying common misrecognitions one by one and putting small patches into the reference tables and the software. You do this language by language, workplace sphere by workplace sphere. Only Nuance has the scale to do it -- it will put them farther and farther ahead of Microsoft or anybody else.
If Microsoft wants speech across their product line, they will someday have to come to Nuance. There is simply no other way to develop a world-class product in terms of the numbers of languages supported and the quality of the product. It takes an immense amount of work. There was a two-year gap between the release of Dragon 9.0 and 10.0, and Nuance claims only a 20% improvement in recognition quality for that work. This is a difficult game. It does not make business sense for Microsoft to build when they could buy.
Microsoft faces other constraints. Nuance has the synergy of working with all players in the field. Microsoft faces the problem that many players in the data processing world are its customers and competitors. Moreover, the industry's trust level for Microsoft is not very high. If Microsoft were to develop good continuous speech, they will still have less market potential than Nuance.
Could Microsoft acquire Nuance? No, the antitrust issues would be too formidable. Nuance itself has had to answer antitrust questions in its skein of acquisitions. And, once again, Nuance's potential would be less viable as a part of Microsoft than presently, as a stand-alone entity.
To me the logic says that Microsoft will be driven to use Nuance if it wants speech in its products. The companies already have a track record of cooperation on the Ford Sync product. Ford may be sinking, but the Sync itself is a success. Nuance inherited Microsoft is a partner in the Philips acquisition. From all I see, Nuance knows how to be a good partner.
When and if Microsoft incorporates speech using Nuance, that will be the imprimatur needed for much wider use. People who teach Microsoft will teach the use of speech.
When will it happen? Microsoft could use a little juice at the moment. The desktop business is their most profitable segment, and it is a little bit long in the tooth. As Gates has seen for the last decade, speech will really jazz it up. The question is, when will they concede that it has to be somebody else's speech products? They are not dumb. My hope is it is sooner rather than later.
Added information, from Investors Business Daily and Internet sources.
Next version of Windows will be called "Windows 7" and will ship in 2010. It is expected to include speech, but details are not clear. In my guess, odds are that no deal with NUAN, even if one is in the works, would be announced before mid-2009.
ahhhh-it just hit me-besides the general market stinking-tech has been awful but throw in the auto business with nuan conections with Ford and the like--we have the worse of all 3 worlds--yippee!!
The short answer is that they are all dropping.
Nuance appears vulnerable because it has a leveraged balance sheet and it has never reported much of a profit. You have to believe that they will continue to grow, at least enough to cover their debt. You have to believe that the goodwill on their balance sheet is worth something. You have to believe that they will continue to do a good job of integrating acquisitions. For all of these reasons, by-the-book financial screening will pass Nuance by. You have to believe in the future of the technology.
This has been the case with a lot of great stocks in their time -- AOL, Oracle, Cisco.
This is the best time to study a stock market. A lot of companies are becoming seriously undervalued. However, it is not a time to rush in. The seriously undervalued have a way of becoming gravely, terribly undervalued. Take a look at the volume yesterday. Nuance was down 11% at one point on less than average volume. There are no buyers.