Speculation Abounds as Talks of a Nuance Acquisition Resurface

by Robert Palmer | 6/19/14

A Wall Street Journal report on Monday stated that Nuance Communications is in talks with Samsung and others — including unnamed private equity firms — regarding a potential sale of the company. The news sparked a whirlwind of market reaction and speculation focused primarily on how a Nuance acquisition might impact the market for speech recognition technology.  

Nuance is recognized as a leader in speech recognition software, and its voice-based technology is used in products spanning a myriad of market segments, including smartphones, tablets, GPS systems, automobiles, televisions, and office desktop/workflow applications. What has dominated headlines thus far is how a Nuance sale might impact Apple, which uses Nuance technology to help power Siri, the voice-based personal assistant application used on the Apple iPhone, iPad, and iPod products. 

One of the high-profile suitors mentioned in the WSJ article is Samsung, already a Nuance technology partner that is aggressively trying to position itself as a dominant player in the Android space. Analysts have speculated that a Samsung buyout of Nuance could have dramatic implications for Apple and its iPhone ecosystem. When introduced to the market, Apple’s Siri technology was recognized as a significant advancement to the iPhone platform and it has since become very popular among iPhone users.

This is certainly not the first time that Nuance has been mentioned as an acquisition target. Only a couple of years ago it was widely reported that Apple itself was planning to snap up the firm. The rumors, which proved to be just that, resulted from a comment by Apple co-founder Steve Wozniak, who mistakenly said that Apple had already acquired Nuance. Apple soon backtracked but it was assumed then that the two companies might be pursuing a potential deal. 

Nuance has a market value of approximately $6 billion, although it has struggled lately, reporting losses for six straight quarters. Nevertheless, most analysts suggest that Nuance remains a prime acquisition target due to its strong technology portfolio. So far, Nuance has declined to comment on the subject.

Our Take

While a Nuance buyout could cause significant disruption in the mobile technology arena, it would have much broader implications. Thus far, there has been very little discussion as to how such a deal might impact the office technology landscape. Nuance actually has its roots in document solutions — going all the way back to its early days as ScanSoft and progressing through various mergers and acquisitions with companies such as Visioneer and others. 

Nuance is a perfect example of a software company that has grown through acquisition. A quick glimpse at the brands and product names that make up its history provide a clear understanding as to its heritage in the document imaging space: TextBridge, PaperPort, OmniPage, Equitrac, Copitrak, Safecom, eCopy, and Power PDF, just to name a few. 

Over the past few years, Nuance has emerged as a market leader in document imaging solutions, with products that span a variety of applications, including print management, capture and conversion, workflow, secure printing, and managed print services. The firm’s penetration in document imaging runs deep. According to Nuance, more than 1 billion printed pages are currently managed by Nuance software solutions, and 3.6 million knowledge workers currently use its eCopy ShareScan solution. 

Meanwhile, the Nuance Document Imaging group works closely with virtually every major hardware OEM in the printing industry — and most support Nuance document solutions either as part of their embedded systems architecture, through software bundling, or by providing “hooks” into specific Nuance applications. Indeed, when you look at the vendors that Nuance counts as partners or supported device brands it is hard to find a printer/MFP vendor that is not listed. 

So, what would a Nuance acquisition mean to the imaging and printing market? Naturally, the answer to that question varies dramatically depending upon the buyer. As mentioned, most analysts covering this recent news have ignored or barely mentioned Nuance’s document imaging technology. Some argue that the only reason Samsung would acquire Nuance would be to strategically block Apple, with one analyst suggesting that Samsung “would not have much use for the other parts of the Nuance business.”

Samsung, however, has a substantial printing business, and the firm has been quite vocal about its strategic plans to grow that business in pursuit of a much larger share in the SMB and workgroup space. To date, Samsung has become a strong player in SOHO and SMB markets but channel limitations and a somewhat disjointed solutions strategy have stymied opportunities in the office workgroup and enterprise segments — particularly in the U.S. It certainly seems like Samsung would see value in Nuance beyond its expertise in voice recognition technology. At a minimum, it is conceivable that Nuance Document Imaging solutions could reside somewhere within the Samsung printing business. 

On the flip side, it is more difficult to imagine how a Samsung acquisition might impact existing Nuance partnerships and customer installs. Nuance claims that nine out of the top 10 MFP manufacturers are currently partners for its solutions. Nuance has also developed a strong set of vertical solutions in the areas of workflow automation, records management, job accounting and tracking, just to name a few. The firm’s vertical solutions serve industries such as health care, legal, financial, education, and many others. 

How existing customers and OEM partnerships would be impacted by a Nuance acquisition is hard to say. Certainly, Nuance’s ability to partner directly with hardware OEMs has been made easier by the fact that it does not sell hardware itself, and therefore is not a direct competitor. If Samsung were to acquire Nuance those existing technology development partnerships would certainly come into question.

If Nuance were to be acquired by a company that has no interest in imaging and printing the final outcome becomes even more muddled. Would the Document Imaging group within Nuance be spun off into a new organization? Perhaps, but it could simply continue to operate as a separate business unit. Whatever the case, it is hard to imagine that the business would simply die off given its substantial size and penetration in the market. This is one that we will continue to watch closely as more develops.

 

Robert Palmer is chief analyst and a managing partner for BPO Media, which publishes The Imaging Channel and Workflow magazines. He is an independent market analyst and industry consultant with more than 25 years experience in the printing industry covering technology and business sectors for prominent market research firms such as Lyra Research and InfoTrends. In December 2012 he formed Palmer Consulting as an independent consultancy focused on transformation, mobility, MPS, and the entire imaging market. Palmer is a popular speaker and presents regularly at industry conferences and trade events in the U.S., Europe, and Japan. He is also active in a variety of imaging industry forums and currently serves on the board of directors for the Managed Print Services Association (MPSA). Contact him at robert@bpomedia.com.