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Nuance Raises Its Voice with Cash and IBM Patents
Posted by Donald A. DePalma on February 17, 2009  in the following blogs: Business Globalization, Translation and Localization, Technology, Web Globalization, Interpreting, Market Data, Global Marketing, Supplier Business Issues, Best Practices
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In January, speech technology provider Nuance Communications announced that it received a US$175 million investment from private equity firm Warburg Pincus and that it would acquire patents from IBM, one of its major competitors in the speech recognition sector. Both the size of the investment and the technology transfer between rivals made these announcements stand out, so we checked in with our contacts at Nuance and IBM.
  • First, the money. Warburg Pincus acquired 17.4 million shares of Nuance, giving it an ownership stake of about seven percent for its US$175 million investment. Steve Chambers, president of Nuance's mobile, enterprise, and consumer devices unit, said the company will use the money to acquire companies in the speech and imaging fields. We've long cast Nuance (and ScanSoft in its previous incarnation) as potential aggregators in the language technology space; the Warburg Pincus war chest increases that likelihood as it trumps any other investment in the natural language sector. Chamber expects to score bargains in today's uncertain market -- and he anticipates some acquisitions that the company might not have been able to consider before this combination of cash and crisis.
  • On the technology front, rival IBM licensed speech technology patents and software to Nuance. CTO of IBM's speech unit, Dr. David Nahamoo, told us that the deal gives Nuance access to some IBM patents and a one-time snapshot of server-based WebSphere and embedded ViaVoice software. It is the first example of IBM's decision in August 2008 to open IBM Research's speech assets to customers and partners. At the time, IBM explained to us that it wanted to get the results of its research into the market more quickly than it could through its own product offerings alone. Last month, IBM announced that it had received 4,186 U.S. patents in 2008, thus becoming the first company ever to net more than 4,000 in one year and beating Samsung (3,515), Canon (2,114), Microsoft (2,030), Intel (1,776), Matsushita/Panasonic (1.745) -- and the entire language technology sector combined.
IBM said that Nuance can use the software and patents as it sees fit. Chambers told us that Nuance will incorporate the "best of" feature attributes and innovations from both its own and IBM's code bases. He expects to see gains of 25 to 30 percent in critical tasks and recognition accuracy when Nuance completes this exercise.

Nuance has done this before -- it organically developed its own speech technology and integrated the intellectual property of five companies that it acquired over the years. IBM's patents and software will flow into Nuance's products, which today work in 50 languages on the server and 30 in standalone PCs and embedded devices such as automobile voice recognition systems.

In December 2008, we predicted that speech would take center stage as "the" multilingual issue as companies and consumers seek efficient communication without a keyboard. The inclusion of leading technology from IBM and the acquisition of intellectual capital from innovative smaller players will accelerate Nuance's position in this rapidly evolving sector.


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Keywords: Mergers and acquisitions, Speech technology, Technology strategy

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