Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

Apple Inc. (AAPL), Nuance Communications Inc. (NUAN): Why a Deal Would Make Sense

When activist investor Carl Icahn recently disclosed his large stake in Apple Inc. (NASDAQ:AAPL) on Twitter, the company’s ailing stock surged. Investors believed that Icahn could finally force CEO Tim Cook to make some dramatic changes to boost shareholder value. When Icahn recently revealed that he also owned a 16% stake in speech recognition pioneer Nuance Communications Inc. (NASDAQ:NUAN), the creator of Siri, frenzied speculation that he would force Apple Inc. (NASDAQ:AAPL) to finally buy Nuance Communications Inc. (NASDAQ:NUAN) flooded the Internet.

Apple Inc. (NASDAQ:AAPL)

There could be huge implications for the health care industry if this happens, as it is already a major consumer of Apple Inc. (NASDAQ:AAPL)’s iPads and Nuance Communications Inc. (NASDAQ:NUAN)’s voice-recognition software in electronic health records, or EHRs.

Would Apple Inc. (NASDAQ:AAPL) buying Nuance Communications Inc. (NASDAQ:NUAN) actually make sense for either company, though? Let’s take a look at the facts and figures fueling these rumors.

Stagnant growth at both companies
Both Apple Inc. (NASDAQ:AAPL) and Nuance Communications Inc. (NASDAQ:NUAN) posted unremarkable top and bottom line growth last quarter. Apple’s revenue inched up 0.9%, but its earnings dropped 21.8% from the prior year quarter. Nuance’s GAAP-adjusted revenue rose 8.8%, but it posted a GAAP-adjusted net loss of $0.11 per diluted share compared to a profit of $0.25 a year earlier.

Revenue at Nuance Communications Inc. (NASDAQ:NUAN)’s health care business surged 29.1% to $238.1 million, but its mobile and consumer segment reported a 16.2% decline to $111.0 million. This suggests that pressure from other voice recognition products on the consumer end, most notably Google Inc (NASDAQ:GOOG) Now, is starting to take its toll. Nuance also suffered from an ongoing shift from sales of upfront licenses to cloud-based options.

Apple’s Nuance-free Siri could be Apple Maps revisited
To add further pressure to Nuance, Apple Inc. (NASDAQ:AAPL) is creating a Nuance-free version of Siri that could potentially end the companies’ longtime partnership. That looming threat is one of the main factors that have caused Nuance shares to slide 20% over the past twelve months.

The development of its own speech-recognition engine is part of Apple’s broader plan to free itself from Google Inc (NASDAQ:GOOG)’s ecosystem. In June, Apple announced that Siri’s default search engine in iOS 7 would be Microsoft‘s Bing instead of Google Search. The company also announced that it was deepening its ties with Yahoo! to create more apps for the iOS ecosystem.

This desire to free itself from Google also led to Apple’s worst failure in recent memory, however: Apple Maps. The combination of several different GPS mapping technologies in the software melted digital roads and left travelers stranded.

Google then struck back by releasing the Google Chrome web browser, which has proven to be a popular alternative to Apple’s Safari. It then released Google Now for iOS, pushing the voice wars straight back into Apple’s backyard.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.