Activist Investor Carl Icahn May Force Showdown at Nuance with 9.3 Percent Ownership Stake

By

A Massachusetts-based speech technology solutions provider, and the technology behind Dragon speech-to-text software and Apple’s Siri and many other familiar voice technologies, has been suffering from underwhelming earnings as of late.  

After a disappointing earnings call in February, the company’s shares fell 19 percent in one day.

The company may have found a good friend – or an unpleasant enemy, depending on your perspective – in the form of billionaire investor Carl Icahn, founder of majority shareholder of Icahn Enterprises, a diversified holding company. Icahn is famous for acquiring significant portions of underperforming companies and pressuring them to make significant management changes, which has earned him the sobriquet of “activist investor.”

Yesterday, Icahn revealed that he now owns 9.3 percent of Nuance, according to the Boston Globe.

The “enemy” prediction by the Boston Globe is due to the reputation of Nuance’s chief executive, Paul Ricci, who has been described as “combative” and “ego-bruising,” much of this criticism based on Nuance’s unpleasant acquisition of Cambridge, Mass.-based competitor Vlingo. Industry analyst Walt Tetschner has described Ricci as a “hard-nosed manager,” and critics and former employees have alleged that Ricci used threats and expensive litigation to wear down competitors.

Ricci vs. Icahn could wind up being the best hostile takeover show of the year.

Disappointed stockholders are likely brightening up on the news, however: after the announcement of Icahn’s stake, Nuance’s shares rose 5.70 percent Tuesday to close at $21.33. This would value the overall company at $6.75 billion, with Icahn’s share at $625 million.

Analyst Tom Roderick told CNBC that Icahn’s involvement could go one of four ways: 1) lobbying for changes in corporate structure, like changes to executive compensation or a reduction in M&A activity; 2) waging a proxy battle for control of the board and the management team; 3) pushing to maximize value by divesting business segments; and 4) evaluating the potential for an outright sale of the company.

As the smartphone and device market continues to expand, and we move into the phase that’s been called “The Internet of Things” – the integration of Web browsers into home management systems, cars, appliances and nearly anything else that can be bettered with information – speech technology will become even more critical. Beyond asking your phone for directions, as with Siri, in the near future we may be asking our televisions to change programs, our cars to turn down the heat and our smart meters to start the dishwasher when the electric rates go off-peak.

Speech recognition technology such as that from Nuance, which is arguably one of the most important players in the speech technology industry, will become the foundation on which much of this “smart” technology is built.

An underperforming Nuance isn’t well positioned to take advantage of these market opportunities, and a mistake-prone management may well wind up holding the company’s stellar technology hostage to poor decisions.

As a final thought, it’ll be interesting to see Apple’s take on this move by Icahn. Apple has a great deal invested in Nuance technology, both literally and figuratively, and it has never been a company to stand aside and let its best interests’ fall where they may.




Edited by Braden Becker

TechZone360 Contributor

SHARE THIS ARTICLE
Related Articles

Coding and Invention Made Fun

By: Special Guest    10/12/2018

SAM is a series of kits that integrates hardware and software with the Internet. Combining wireless building blocks composed of sensors and actors con…

Read More

Facebook Marketplace Now Leverages AI

By: Paula Bernier    10/3/2018

Artificial intelligence is changing the way businesses interact with customers. Facebook's announcement this week is just another example of how this …

Read More

Oct. 17 Webinar to Address Apache Spark Benefits, Tools

By: Paula Bernier    10/2/2018

In the upcoming webinar "Apache Spark: The New Enterprise Backbone for ETL, Batch and Real-time Streaming," industry experts will offer details on clo…

Read More

It's Black and White: Cybercriminals Are Spending 10x More Than Enterprises to Control, Disrupt and Steal

By: Cynthia S. Artin    9/26/2018

In a stunning new report by Carbon Black, "Hacking, Escalating Attacks and The Role of Threat Hunting" the company revealed that 92% of UK companies s…

Read More

6 Challenges of 5G, and the 9 Pillars of Assurance Strategy

By: Special Guest    9/17/2018

To make 5G possible, everything will change. The 5G network will involve new antennas and chipsets, new architectures, new KPIs, new vendors, cloud di…

Read More