Consider Selling Nuance Communications

Nuance Communications' (NASDAQ: NUAN  ) near-term outlook faces structural headwinds as customers update their billing agreements with the company from an up-front payment structure to an on-demand structure that's based on usage. As a result, the company is expecting revenues may come under pressure in the near term, but ultimately believes it's in the company's best interest longer term.

Fool contributor Steve Heller argues that it may not be worth waiting until these headwinds subside because it's a big unknown when that might be. Taking his own advice, Steve is currently considering what to do with his personal Nuance stake. Check out the video below to hear why you should considering selling your Nuance shares.

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  • Report this Comment On August 10, 2013, at 1:40 AM, Glasscase wrote:

    Hey Steve, I certainly agree with your thought process regarding the shifting of revenue. However, before I pulled the plug on NUAN I would certainly factor in recent changes in stock ownership. Icahn's stake is currently at 16% which i believe is getting large enough to shake the BOD up a bit. It's difficult to figure out what CI magic number is but assuming he took his primary position April 12' and his most recent purchase I'm guessing he wants this over $21. Frankly IMO Icahn already has this sold for $30. Stick around a bit.......things are just starting to get good!

  • Report this Comment On August 10, 2013, at 8:44 AM, ScottAtlanta wrote:

    Thanks Steve for your insights. I agree.

    For Nuance to double in price....the 6B market cap would go to 12B. That's not happening with these numbers. Will it? Probably....a few years from now.

    Meanwhile....you're missing other "growth stories" as Steve puts it. I agree. I sold and put the money into more convincing growth story...OLED.

    I think you can come back to NUAN and pick up shares as the company starts to pick up steam....but hopefully you'll be able to buy more shares later b/c you've made more money in the interim.

  • Report this Comment On August 10, 2013, at 3:50 PM, TMFTopDown wrote:

    @Glasscase,

    As exciting as it is for Icahn to be increasing his stake in Nuance, if he were to take any big action, the company has implemented a "poison pill," making it difficult for it to be acquired or reorganize, even if it's in the best interest of shareholders.

    Here's what Nuance's most recent quarterly filing says about this matter:

    "We have implemented anti-takeover provisions, which could discourage or prevent a takeover, even if an acquisition would be beneficial to our stockholders.

    Provisions of our certificate of incorporation, bylaws and Delaware law, as well as other organizational documents could make it more difficult for a third party to acquire us, even if doing so would be beneficial to our stockholders.

    These provisions include:

    •authorized “blank check” preferred stock;

    •prohibiting cumulative voting in the election of directors;

    •limiting the ability of stockholders to call special meetings of stockholders;

    •requiring all stockholder actions to be taken at meetings of our stockholders; and

    •establishing advance notice requirements for nominations of directors and for stockholder proposals."

    What this means for investors like us is that any big shakeups could be drawn out over the course of years, and this could distract management from its primary duty of growing the business long-term. Personally, that's not something I'd like to be a part of as a small investor.

    In the end, I don't think Icahn or any billionaire's conviction is ever a good enough reason to remain committed to an investment. Ultimately, it's up to you to decide if you trust management that this transition will eventually be fruitful for investors. For the reasons outlined in the video, I'm personally skeptical this storyline will play out as stated.

    Thanks for commenting!

    --Steve (TMFTopDown)

  • Report this Comment On August 12, 2013, at 5:24 AM, HuiyiChen wrote:

    From US Medical Community:

    "I was at 70K before I was acquired by Nuance. I ended up having to - file bankruptcy

    Posted: Aug 8th, 2013 - 6:28 pm

    when they decided that everyone makes the same salary no matter what the experience or difficulty of accounts. Then they overstaffed my account so that I was only getting work half the time. I went from 70K a year pre Nuance to 15K with Nuance. I sold everything of value and ended up back to renting, lost everything, and filed bankruptcy in that 1 year. On the plus side, now that I have no debt, no car, and cheap rent I can afford to work minimum wage and start over and can get grants to take college classes.

    Basically Nuance takes talented, educated people who are productive members of society and turns them into minimum wage welfare recipients. "

    Sad as it is that another job is being taken over by technology, it is also a testimonial the technology is creating value for medical industry. The number of hospitals adopting Nuance is climbing and so should Nuance revenue from this sector.

    3/4 million TVs, 1 million desktop, 20 million cars, 250 million phones and 800 million keyboards are voice enabled. According to Baidu, Nuance gets paid $3-5 per car and $0.2 per phone. More devices are adopting its voice recognition technology which represent potential earning.

    Forget to add that customer review shows 75% Direct TV customers like the idea of channel search by voice command.

    Nuance's technology differs from Googles. Considering the time it takes to develop a voice recognition on par with Nuance's, it'd be more economic to acquire it or pay it to provide the service.

    2013 earnings are disappointments but on the up side, revenue is going stable as it is shifting from sales to service.

    $16.5-18.0 is a good range to acquire NUAN. I have good faith in Nuance in 2014. I long NUAN, SSYS and TSLA.

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