Nuance: The Opportunities Ahead
To help investors sort out the risks and opportunities facing Nuance Communications , we've created a new premium report on the company. Below is an excerpt from the report, which breaks out some of the opportunities facing Nuane. We hope you enjoy this sample.
Much of the recent attention that Nuance has received over the past couple years relates to its relationship with Apple as the speech engine driving its Siri virtual assistant. Both Nuance and Siri (before Apple acquired it in 2010) were spun out of SRI International -- Nuance in 1994 and Siri in 2007. As a major technology trendsetter, Apple's focus on voice interactions has catalyzed interest in voice recognition among consumers and rival technology companies alike.
The terms of Nuance's contract with Apple are expectedly shrouded in secrecy, so detailed revenue implications are ambiguous. Thanks in part to Apple's interest, Nuance's mobile and consumer segment has put up strong growth. Through the first three quarters of the fiscal year, mobile and consumer revenue has increased 30% relative the same period a year ago to $356 million. The segment's profit was also up 36% to $149.7 million over that time.
As Siri makes its way into other Apple products, Nuance should continue benefiting, although as previously mentioned, it's unclear to know by precisely how much. Earlier in the year, Nuance simply said its "relationships with mobile customers have become more comprehensive and complex, which has resulted in delayed revenues in some cases, due in part to revenues deferred until completion of certain deliverables and in part to longer negotiation cycles."
Even without transparency into Nuance's relationship with Apple, the numbers continue to speak for themselves: voice will be big part of mobile computing. Nuance even recently introduced its own virtual assistant, Nina, which is similar to Apple's Siri.
Healthcare remains Nuance's largest business, generating 43% of consolidated revenue last quarter. Comprehensive dictation and transcription services should continue to soar in medical settings since it offers convenience, efficiency, and accuracy for care providers and allows them to interact with electronic medical records.
An acquisition in April of this year of Transcend Services for $332.3 million helped bolster Nuance's presence in small- and mid-sized hospitals. Roughly 90% of the hospitals in the U.S. fall into these categories.
As society continues to battle the dangerous urge to text while driving, speech recognition and hands-free interactions in cars will play a large part. Numerous car manufacturers have tapped Nuance to facilitate in-vehicle voice interfaces, including Ford Sync, General Motors' OnStar, and Toyota Motors' Entune. Additional auto customers include Audi, BMW, Fiat, Hyundai, Mercedes, Jaguar, Porsche, Renault, Volkswagen, Nissan, Chrysler, and Mazda. These are included in Nuance's mobile and consumer segment.
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