With Nuance up for sale, should Apple be the one that buys them?

Earlier this week rumors surfaced that Nuance Communications is up for sale. Apple is reportedly a huge customer of Nuance, using the firm's voice recognition software to help power Siri. So, if Nuance really is up for sale, should Apple be the ones who close the deal?

When voice services first started showing up a lot of people questioned their value. People considered them to be gimmicks. But I think people have largely started to accept the value that voice recognition brings to the table. It's quite handy to just ask your phone to tell you the weather forecast, or call home, or even send a brief email or text message when driving. It would be almost pointless (at least today) to dictate large amounts of text using Siri, or Google Now, or any other competing service, but for simple tasks I am a huge fan of these services.

To be clear, Apple doesn't rely on Nuance alone. They've got their own voice recognition group running in Cambridge and they recently acquired Novauris, a pioneer in the field. Apple has also built a lot of their own back-end intelligence, including the sequential inference that makes Siri contextually aware. Although Apple hasn't spoken publicly about the current extent of their relationship with Nuance, it's not unreasonable to assume it's still one piece of a highly complex Siri system that is admired by Apple fans.

Google doesn't use Nuance at all. Instead they hired Nuance co-founder Mike Cohen, among others, to build them their own system Given how important voice activated features are becoming, I think Nuance is an interesting asset that somebody else might buy if Apple doesn't. Samsung has reportedly had meetings with them, and they're definitely large enough to do a $6 billion or larger deal.

Is there a risk that Samsung could buy Nuance and then shut Apple out? I don't think it's a big risk but it is one that exists, and it's worth protecting yourself from that risk if you use Nuance to power the world's most admired digital assistant (that's you, Apple).

If we look at Apple's history they like to own the big pieces of the puzzle. They went out and created their own maps because maps are important. They bought a chip company so they could fully control the processors in iOS devices. They recently bought Beats to gain access to a better streaming music service.

It's possible Apple's own efforts on speech recognition are reaching maturity and any dependencies on Nuance will start to fade. There's been some speculation that this, and the maturity of speech recognition in general, could be threatening Nuance's value, leading them to explore acquisition options now that they wouldn't have in the past.

Interestingly, activist investor Carl Icahn — who stalked AAPL in the past — owns 19% of Nuance, and two of his firm's representatives are board members. So he logically had a hand in deciding to explore bids. Icahn might love the idea of selling Nuance to Apple, another firm he holds a sizeable position in.

Apple is still improving Siri. They've already announced streaming voice recognition, Shazam song identification, HomeKit integration, and "Hey, Siri!" for iOS 8. There's still room for on-device voice parsing, however, as well as natural language and context co-processing like Google's doing on the Moto X, and more.

Paying a few billion to acquire Nuance seems like a no-brainer to me. Not only would Apple be able to guarantee full control of voice technology in its current products, like Google does, but it would reap the benefits as the world moves further into wearable computing devices, which will naturally take advantage of voice activated features.

Chris Umiastowski

Chris was a sell side financial analyst covering the tech sector for over 10 years. He left the industry to enjoy a change in lifestyle as an entrepreneur, consultant, and technology writer.

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There are 11 comments. Add yours.

Travis Defilippo says:

It would make sense if they did.

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Irelandjnr says:

Why? The Siri engine is the brains behind it all. There are several voice recognition options out there.

Bonaccij says:

I think you would really need to look at the percentage of Nuance features that Apple is using currently to be able to determine if this would actually be a good buy for Apple. They may not care because they may not actually be using a large subset of what Nuance has to offer. You are right in saying that they like to own the large piece. Has the piece that they currently own and use outpaced what they are getting from Nuance? Also, not sure how much hand holding they want to be doing with Icahn right now...

Dman238 says:

Of course, they have some of the best voice technologies in the world and if they want to prevent becoming even more reliant on Samsung for some of their core technologies that's integral in the way that Siri works, they better outbid Samsung or else have part of their destiny as an interactive platform in the hands of a competitor.

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tlegend2012 says:

The way I see Cortana going now, I think MSFT wll grab it

Dman238 says:

Carl Icahn may benefit from this sale but this will be all about bolstering its voice services on its platform for years to come, as well as preventing its competitors, i.e. microsoft, samsung, google, from getting the upper-hand in what is such an important medium going forward and into the future, in being able to communicate with electronic devices. They would be stupid in not bidding for Nuance, who in all intents and purposes, has the best voice technologies out there and is the progenitor of this space.

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vinny jr says:

Absolutely, Apple needs to jump on that ASAP.

Dev from tipb says:

If, as Rene has speculated, licensing fees (and not technical ability) is what has prevented Apple from on-board voice processing, then they needed to do this years ago.

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jrsharp70 says:

Nuance is heavily invested in the medical field. Apple seems to want a piece of this in a big way. So it seems like a good idea to an outsider. But who knows what Apple already has cooking.

Irelandjnr says:

Their market cap is $6.15 B; they have to pay more though.

mshonhall@gmail.com says:

I think this deal makes more sense than the Beats deal. And, I'm not knocking the Beat's deal, at all. I just think this one makes for a definite better internal fit.