Track the companies that matter to you. It's FREE! Click one of these fan favorites to get started: Apple; Google; Ford.



How Difficult Will Nuance Communications' Revenue Transition Be?

When Nuance Communications (NASDAQ: NUAN  ) recently reported earnings, it acknowledged that many of its customers have begun updating their compensation agreements with the company.

Instead of being paid upfront in a lump-sum payment, customers are opting to compensate the voice-recognition technology company on an on-demand basis, meaning that they will pay only for the services they use over the life of their contracts. As a result, Nuance was forced to lower guidance for its next-quarter and current-year results, indicating that this revenue shift is putting pressure on near-term results. Going forward, Nuance expects that this shift will ultimately benefit the company on a mid-term and long-term basis.

In the following video, Fool contributor Steve Heller discusses Nuance's revenue transition and how investors can tell whether the longer-term revenue growth story will remain intact.

The tech world has been thrown into chaos as the biggest titans invade one another's turf. At stake is the future of a trillion-dollar revolution: mobile. To find out which of these giants is set to dominate the next decade, we've created a free report called "Who Will Win the War Between the 5 Biggest Tech Stocks?" Inside, you'll find out which companies are set to dominate and give in-the-know investors an edge. To grab a copy of this report, simply click here -- it's free!

Read/Post Comments (1) | Recommend This Article (1)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On August 19, 2013, at 12:12 AM, thinklogically wrote:

    This could be one of the most naïve, poorly researched reactions to consistently deteriorating corporate performance and intentionally unclear guidance that I’ve witnessed in some time.

    Nuance has been in the on-demand business for over a decade. Everyone who pays attention, even the Nuance CEO, understands the difference between and revenue recognition basics regarding license revenue, services revenue and on-demand revenue.

    Look at the history over the last SEVERAL years. Paul Ricci has been pitching this “Revenue Transition” excuse every time they fail to sell up to plan and fail to cover up performance with another acquisition or two. They’ve come up with new metrics that they wave in front of rookies and fools showing you things like the growth in bookings backlog!

    Let me help out a bit:

    A 3-Year TCV (Total Contract Value) means almost nothing (except to the sales rep that booked it and wants paid for the paper that she got signed). The two issues that Nuance has never been able to address, and has shown no progress in developing capabilities to address, are: 1) realization of that booking, and 2) timing of that realization.

    The $9M TCV ($3M / year for 3 years) is only worth (in the Revenue line) what is ACTUALLY realized WHEN it is actually realized. So the deployment which was scheduled to be completed in 6 months, but takes 12 months (very common for Nuance) and delivers 80% of its forecasted $3M annual contract value ACTUALLY ONLY DELIVERS $1.2M of the planned $3M from the backlog, 40% realization.

    So simply ask Paul or the CFO a favor. Every time they present a Bookings Backlog chart, simply ask for the performance realization against that backlog.

    You’ll be a hero. You’ll have learned something. You’ll help your audience as you are intending to do. That is, of course, ONLY IF they answer you instead of doing (high likelihood) their version of Michael Jackson’s moonwalk.

Add your comment.

Compare Brokers

Fool Disclosure

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 2599535, ~/Articles/ArticleHandler.aspx, 9/26/2016 8:32:17 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...

Today's Market

updated 2 days ago Sponsored by:
DOW 18,261.45 -131.01 -0.71%
S&P 500 2,164.69 -12.49 -0.57%
NASD 5,305.75 -33.78 -0.63%

Create My Watchlist

Go to My Watchlist

You don't seem to be following any stocks yet!

Better investing starts with a watchlist. Now you can create a personalized watchlist and get immediate access to the personalized information you need to make successful investing decisions.

Data delayed up to 5 minutes

Related Tickers

9/23/2016 4:00 PM
NUAN $14.56 Down -0.10 -0.68%
Nuance Communicati… CAPS Rating: ****