Speech technology vendor Nuance Communications Inc has set its sights on overtaking ScanSoft Inc in Europe, Nuance’s CEO Chuck Berger told ComputerWire.
A March report from research house Forrester found that ScanSoft was at that time the worldwide market leader in the speech technology market thanks to its acquisitions of Dragon Systems, Philips Speech Processing, Lernout & Hauspie and SpeechWorks.
But in a September report Gartner said that Nuance is now market leader in speech software in North America. Fellow research house Frost & Sullivan, however, in September announced that it considers the SpeechWorks Division of ScanSoft to be North American market share leader based on 2003 data.
Berger described the situation as neck and neck. He conceded that ScanSoft still has the lead in Europe thanks to its acquisitions, several of which were European companies. But that said, we think we’re selling more new business [in Europe] than they are, Berger added.
Berger said the company will not follow ScanSoft’s strategy of making numerous acquisitions to bolster its customer base and product portfolio: We’re always looking to see if there are successful, profitable, growing companies to acquire, he said, but we’re not going to buy failed companies in the speech market like ScanSoft did.
According to Berger there is, nonetheless, plenty of market opportunity for more than one vendor in speech technology. The call center speech automation market – where Nuance specializes – is only 5% to 10% penetrated with automated speech technology, he said.
Berger argued that speech technology is at a relatively early stage in its development, so the company has had to invest heavily in R&D, which has in turn led to it posting net losses. In its latest quarter the company posted a net loss of $1.6m on sales of $14.4m, up 11% from sales of $12.9m in the same period a year earlier. Berger said the company will achieve profitability in the current quarter (ended December 31) and maintain profitability thereafter.
His strategy for overtaking ScanSoft in Europe includes the recent hiring of a new SVP of sales and professional services, and an ongoing examination of the company’s channel strategy. I’m busy making sure we are going through the right channels and making changes where we are not, Berger said. The channel includes OEMs, hosting partners, interactive voice response (IVR) partners and VARs. He said that the company’s support for emerging speech standards such as VoiceXML will also drive growth.
Nuance had $57m in cash as of its latest quarter and its stock gives it a market cap of $173.4m. ScanSoft’s share price at the time of writing gives it a market cap of $422.5m, and it had cash and equivalents of $22.6m as of its latest quarter ended June 30. For that same quarter ScanSoft posted sales of $46.1m, up 66.2% year on the year – thanks in part to its multiple acquisitions. As well as speech technology ScanSoft also offers various document management, conversion and processing software. Other players in the speech technology market include IBM (ranked third by market share according to Forrester) and Microsoft.