Nuance Rides the Apple Wave
Nuance Communications (NAS: NUAN) , the Massachusetts-based provider of voice and language solutions, posted double-digit revenue growth in the fourth quarter and still made a loss due to one-time expenses. On the brighter side, the adjusted figures were above analyst expectations. Let's take a closer, Foolish look at the nuances of the company's fourth quarter.
Figuring it out
Nuance's total revenues for the quarter were up 18%, to $367 million, owing to its strong performance in the mobile and consumer business markets. It also saw better numbers in its enterprise business division. However, if the company had been able to add revenues from its acquisitions, including eCopy, SVOX, and Equitrac, the figure would have been quite a bit higher at $399.5 million.
After taking $25.5 million in restructuring charges into account, Nuance dipped to a loss of $5.1 million versus a net income of $2.1 million during the same quarter last year. On an adjusted basis, the company originally made a (non-GAAP) profit of $133.5 million, up 33% from $100.3 million in the previous year's quarter.
The company's health-care solutions division posted a 22.6% rise in revenues because of large new bookings for its eScription, Dragon Medial, and radiology products. Key customers included Cerner (NAS: CERN) , Baycare, and Kern Medical.
Mobile and consumer revenues were up by 31.6%, to $118.7 million, due to bookings and design wins from key customers such as Amazon (NAS: AMZN) , Comcast, and Ford (NYS: F) . Enterprise solutions were also up a tad, at $80 million. But, best of all, imaging solutions saw a chest-thumping 47.2% jump, to $52.1 million, on account of bookings from key customers such as Canon, Deloitte, and Xerox (NYS: XRX) .
The Apple effect
The once-obscure speech technology company shot into the limelight as it was a key enabler in Apple's (NAS: AAPL) iPhone 4S Siri voice-command mechanism. The software-based voice assistant used in the phone follows the natural language of its user to answer questions, make recommendations, and execute many of the phone's functions. Publicity gained from this association seems to have created a halo effect and has driven overall interest in Nuance's voice-based software.
Siri was bought by Apple back in April 2010. Before that, Siri had announced that its software would be made available for Research In Motion's BlackBerry phones and for Google Android phones, but all development efforts for these platforms went to naught after they were canceled by Apple.
Giving voice to mobile apps
Besides its desktop applications, Nuance has powered ahead with its NDEV Mobile developmental program, which gives developers across the world access to the Dragon Mobile SDK (software development kit) for enabling speech-to-text and speech-input capabilities in mobile applications.
NDEV Mobile, which now has 6,000 developers in its ambit, makes it easy for developers to make voice-enabled applications for the iOS, Android, and even Microsoft's (NAS: MSFT) Windows 7 phone applications. The company recently expanded the NDEV program to Denmark, Portugal, and Poland, effectively making the SDK support 20 voice-to-text and more than 30 text-to-speech languages.
Swiping a share of the mobile pie
Nuance seems to have gotten into the groove and is continuing to build its presence in the mobile app front. Nuance announced in October that it would acquire Swype for $102.5 million. Swype makes alternative keyboard software for tablets that allows users to type words by sliding a finger or stylus from letter to letter.
Back in 2007, Nuance bought Tegic Communications, which created the famous T9 predictive text input software. In 2010, the company bought ShapeWriter, an app that's similar to Swype, from an IBM research wing. The idea behind these acquisitions could be to bolster the company's patents in the mobile space.
The Foolish bottom line
Nuance seems to be making all the right moves in the mobile space, and it seems to be adequately diversified into different sectors such as health care, automobiles, and consumer products. With this in mind, I feel that Nuance might benefit a lot in the long run. What do you Fools think about Nuance? Leave your comments in the box below. Also, don't forget to add Nuance to your very own watchlist. It's absolutely free, and helps you stay on top of the latest news and analysis for your favorite companies.
At the time this article was published Keki Fatakia does not hold shares in any of the companies mentioned in this article. The Motley Fool owns shares of Apple, Google, Ford Motor, and Microsoft.Motley Fool newsletter serviceshave recommended buying shares of Google, Ford Motor, Nuance Communications, Apple, Microsoft, and Amazon.com.Motley Fool newsletter serviceshave recommended creating a bull call spread position in Apple and creating a bull call spread position in Microsoft. Try any of our Foolish newsletter servicesfree for 30 days. We Fools may not all hold the same opinions, but we all believe thatconsidering a diverse range of insightsmakes us better investors. The Motley Fool has adisclosure policy.
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