Last week, I had a day where everyone I happened to chat with here in Silicon Valley was complaining of wrist pain. No wonder, between our work and new found social media habits, many of us spend upwards of ten hours per day just typing on our beloved laptops or iPad keyboards. Enter speech recognition to save the day.
The undisputed leader of the speech recognition field, and the first to bring a real product into the mainstream consumer market, is Nuance Communications Inc. (NASDAQ:NUAN). Nuance Communications Inc. (NASDAQ:NUAN), the unsung hero and creator of Apple’s Siri, is, in my opinion, a definite good buy and could become a future ten-bagger if it can keep the copycats and alligators nipping at its heels at bay.
From the Speech Technology Group website,
In speech recognition, “they skated to where the puck was going,” says Daniel Ives, a research analyst who follows the company for the investment bank FBR & Co. “Both organically and through acquisitions, they’ve built a massive treasure chest of technology and customers. They’re miles and miles ahead of any other competitor.”
With it’s solid Dragon product line of PC and Mac-based solutions for the computer environment, as well as the Dragon Mobile assistant for mobile devices, it appears that Nuance Communications Inc. (NASDAQ:NUAN) and the puck are skating toward the goal line. Sweetening the pot is that Nuance Communications Inc. (NASDAQ:NUAN) seems to have fixed the issues that plagued early speech recognition programs that spawned many jokes, although Siri still does have some laughable mix-ups from time to time. It is a real challenge to create speech recognition software that works for not only other languages, but also responds accurately when different accents and dialects are used. Think, “Hey y’all Siri, I’m fixing to et somthin. Where can I find a good ole Mickey D’s?” Ok, maybe that one wouldn’t fly, but we are close. You get the picture.
The puck just keeps on moving, and Nuance Communications Inc. (NASDAQ:NUAN) knows that. The next direction the company is taking looks like a solid one to me – vehicle speech recognition. Dragon Drive, being tested in many new vehicles, allows you to play a certain song just by asking, or initiate a call through your vehicle’s central control system. This is a precursor to the day when speech recognition software, as part of “the Internet of Everything,” will allow you to ask about the weather or initiate an automated drive to your destination of choice using only voice commands, and wake you up upon arriving at your destination, or at another time specified by your voice request. That means a nap in the car after a hard day at work. I can hardly wait!
Looking at the numbers, Nuance Communications Inc. (NASDAQ:NUAN) shows a return on equity of 6.7, which is solid. With a market cap of $7.2 billion and 316.27 million outstanding shares, it’s also popular, but definitely falling under the “hype umbrella” with a three-year beta of 1.36.
The competition
But, what about the alligators nipping at the company’s heels? There are some big ones, and some well-funded small ones with “piranha power.” One hole in the offering by Nuance lies in the Android market; Dragon Go is all that can be used here as an app, and it really can’t compare to Siri. Enter Ask Ziggy, a Rocklin, California-based startup dedicated to making a personal assistant for Windows and Android mobile devices. A press release went out in late 2012 announcing the closure of $5 million of strategic investment dollars from a “well-known” multinational corporation. I’d lay money on it being Microsoft Corporation (NASDAQ:MSFT), Amazon.com, Inc. (NASDAQ:AMZN), or Google Inc (NASDAQ:GOOG).
Amazon
Amazon.com, Inc. (NASDAQ:AMZN) has the most to gain by adding its own speech recognition capabilities to Kindle and Kindle Fire. Watch this company carefully, as it quietly purchased startup, Yap, in 2011. This move may propel Amazon.com, Inc. (NASDAQ:AMZN) into the mobile game in another way, making Kindle devices more than just readers, and competitive to the growing plethora of mobile devices on the market today. It would take a couple of years to perfect the Yap technology for the Amazon.com, Inc. (NASDAQ:AMZN) readership and marketplace. If this happens, the Nuance and iPhone market segments could be given a run for their money. But, in my humble (or not so humble) opinion, the market is expanding faster than the players, which means there is room for everyone, and Nuance will continue to be a good buy even if this happens.
In more recent news, Amazon.com, Inc. (NASDAQ:AMZN) has just purchased text-to-speech company, Ivona, in January 2013 (which is what has fueled the self-reading options for Kindle), and UK-based speech recognition software company, EVA, in April 2013. Clearly something is up, and rumors that an Amazon.com, Inc. (NASDAQ:AMZN) smartphone is coming are rampant. I think Amazon is another way for investors to get a piece of the speech recognition action, and if the rumors are true, an Amazon smartphone with Kindle Fire technology will give the iPhone a run for its money.
Google Inc (NASDAQ:GOOG) has solid voice recognition software as well, and may be another good investment vehicle for those interested in speech recognition technology. Early in 2013, Google Inc (NASDAQ:GOOG) announced voice-activated search capabilities for Chrome. Now, instead of typing in a search term, all you have to do is speak it. This may very well transform the search experience as we know it today. This also helps position the Android platform more competitively against Apple, now that Chrome is an answer to Siri.
Microsoft Corporation (NASDAQ:MSFT) is, in my opinion, the earliest entrant to speech recognition technology, but the weakest choice for an investment vehicle today. Windows 7 came standard with speech recognition technology, but little press time was given to this fact. Why? Probably because the technology needs lots more work. If it worked well, Nuance’s Dragon series of PC software wouldn’t have a market. Also, the PC is now on its way out, a fact that Microsoft Corporation (NASDAQ:MSFT) seems a bit slow to grasp.
The article Are Speech Recognition Companies A Good Investment? Ask Siri originally appeared on Fool.com and is written by Brenda Johnson.
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