Replies to post #215 on Nuance Communications, Inc. (NUAN)

[chmcnfunds]

Just refreshing an old article:

Nuance: The Icahn Activist Trade That Is Not Working
By Jon C. Ogg October 24, 2013 12:15 pm EST

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When you hear about activist investor activity from Carl Icahn and Icahn Enterprises L.P. (NASDAQ: IEP) these days, you might generally think of Netflix Inc. (NASDAQ: NFLX) or Apple Inc. (NASDAQ: AAPL). The Dell deal is history, but there is another activist effort that is so far not working out well for him nor for his investors. This is the case of Nuance Communications Inc. (NASDAQ: NUAN).

Nuance is the technology behind Siri for the Apple Inc. (NASDAQ: AAPL) iPhones and iPads. Icahn has taken two board seats via Brett Icahn and David Schechter. The Icahn entities also own somewhere around 52,437,750 voting shares, worth almost a 17% stake. As part of the Icahn deal to get two board seats, the group agreed not to acquire more than 20% of the voting power of Nuance.

What makes Nuance so interesting is not just Siri, and not just the Dragon dictation software for speech-to-text. Nuance has a shot at being the voice recognition software provider for just about anything and everything in the world that could require speech recognition. Ditto for text-to-speech back to consumers. It is the leader in the field.

Unfortunately, Nuance’s stock price is trading as though there is something far worse than the numbers and promises might hint at. The stock’s 52-week low is $16.18, and the current price of $16.40 is down from a 52-week high of $24.85. The stock also peaked at nearly $30 in early 2012. So much promise, yet so much disappointment.

The company is expected to earn $1.32 per share in 2013 and $1.41 per share in 2014, giving it a blended forward earnings multiple of only about 12 times the consensus. It also trades at only about 2.5 times expected sales.

Unfortunately that growth has slowed down handily. Nuance also has substantial long-term debt. It is going to be a harder turnaround than other Icahn rides, but this is the leader in its field. If you want a piggy back ride on Mr. Icahn’s back that has not risen under his efforts yet, Nuance is still at depressed prices.

As far as the $16.40 share price today, the consensus analyst price target is closer to $21.00.

Icahn cleaned up on his Netflix Inc. (NASDAQ: NFLX) and he is up on his Apple Inc. (NASDAQ: AAPL) bet so far. Netflix was lightened up recently because the investment was up 300% or 400%, and we have to be patient for the Apple impact to see if he can force Tim Cook into a $150 billion buyback. The verdict remains out on Nuance.

By Jon C. Ogg

Read more: Nuance: The Icahn Activist Trade That Is Not Working - Nuance Communications (NASDAQ:NUAN) - 24/7 Wall St. http://247wallst.com/technology-3/2013/10/24/nuance-the-icahn-activist-trade-that-is-not-working/#ixzz2k4xnCCtd
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NUAN

[chmcnfunds]

I don't know the company very well so I found the comments to this article from Apple Insider to be interesting. Too bad there are no recent comments:
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Monday, September 02, 2013, 07:22 am PT (10:22 am ET)

Investors speculate Carl Icahn could push Apple to buy Nuance for speech tech

By Sam Oliver

Carl Icahn's large position in Apple may be a move to force the iPhone maker to buy Nuance Communications, the speech recognition company that drives the some of the tech behind Siri, some investors believe.

The theory was presented by the New York Post, which noted that Icahn has recently bumped up his stake in Nuance to 16.4 percent. The billionaire investor has stated that he thinks share of both Apple and Nuance are currently undervalued.

Icahn is notorious for attempting to block efforts by Dell to take the computer maker private. He has filed a number of lawsuits against the company, which he also owns a large stake in.

Some investors view Apple's reliance on Nuance's technology as a key reason to buy the company. Though it was long suspected, Nuance confirmed in May that its speech recognition helps power Apple's voice driven personal assistant software, Siri.

Nuance does not handle Siri's artificial intelligence layers, but its technology does provide the capability of Siri to interpret a user's voice. Nuance CEO Paul Ricci revealed earlier this year that his company is the "fundamental provider" of voice recognition for Apple.

Investors speculate that Apple could acquire Nuance for $7 billion — an amount that could easily be afforded by the company, which is flush with cash.

However, Icahn has given no public indication that he's interested in a potential deal between Apple and Nuance. The billionaire investor has instead pushed for Apple to buy back more shares in itself, and plans to meet with Apple Chief Executive Tim Cook for dinner in September to discuss that possibility.

Icahn has said he believes that shares of AAPL are "extremely undervalued" at their current price. His support of the company helped to push Apple
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http://appleinsider.com/articles/13/09/02/investors-speculate-carl-icahn-could-push-apple-to-buy-nuance-for-speech-tech

NUAN

[north40000]

If I am correct that Icahn's shares of NUAN have a basis of ~ $19/share, does your projected buyout price of $16/share make any sense?