Why Nuance Communications Shares Popped

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of speech solutions software provider Nuance Communications (Nasdaq: NUAN  ) rallied as much as 10% today after the company refuted any interest in purchasing MModal (Nasdaq: MODL  ) .

So what: Speculation had been swirling on Wall Street that Nuance, the company behind the popular Siri speech recognition software found in the Apple (Nasdaq: AAPL  ) iPhone, would step up and purchase its smaller rival MModal in order to save costs. MModal provides speech recognition software to the health-care sector, an area that Nuance is beginning to move into, and Wall Street figured the synergies from a buyout would benefit both companies. MModal actually accepted a $14 per share buyout offer from One Equity Partners, a private investment arm of JPMorgan Chase (NYSE: JPM  ) , in early July.

Now what: It's not uncommon to see a purchasing company fall when it announces a buyout because of the uncertainty associated with the deal and the financing often needed to facilitate it. Today's move higher is simply a sigh of relief for investors that Nuance's management remains focused on Nuance alone -- and Nuance's future does indeed look very bright. Cirrus Logic (Nasdaq: CRUS  ) , the audio chip provider to Apple's iPhone, recently obliterated Wall Street's guidance to the upside in the upcoming quarter which speaks to epic sales expected from the introduction of the iPhone 5. Nuance's Siri software is rapidly becoming more deeply ingrained in Apple's iPhone and iPad, and should be a driving force behind its growth for years to come.

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Fool contributor Sean Williams has no material interest in any companies mentioned in this article. You can follow him on CAPS under the screen name TMFUltraLong, track every pick he makes under the screen name TrackUltraLong, and check him out on Twitter, where he goes by the handle @TMFUltraLong.

The Motley Fool owns shares of Apple, JPMorgan Chase, and Cirrus Logic. Motley Fool newsletter services have recommended buying shares of Nuance Communications and Apple, as well as creating a bull call spread position in Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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