What Happens to Apple Inc. If Samsung Buys Nuance?

Rumor has it that Samsung is looking to acquire Nuance, in a move that could potentially cripple one of Apple's key features. Can Apple find an alternate supplier or build an in-house solution?

Jun 17, 2014 at 6:00PM

Rumors broke earlier this week that Samsung (NASDAQOTH:SSNLF) may be interested in acquiring Nuance Communications (NASDAQ:NUAN). Such a deal would make sense for Samsung, which has been working hard to beef up its software prowess lately in order to complement its hardware strengths. Nuance already powers Samsung's S-Voice feature, along with other devices that use voice recognition. Furthermore, Nuance's core health-care segment could also complement Samsung's medical device business.

Apple (NASDAQ:AAPL) has long used Nuance's voice recognition engine to power Siri. Voice recognition engines are the behind-the-scenes layer that translates sounds into words; then the application software layer interprets that output. Apple likely has the rights to Nuance's engine under a long-term contract, although nothing is known publicly about the relationship. Additionally, Apple acquired U.K.-based Novauris in April, so it could be interested in building its own in-house engine.

Samsung could potentially afford to kill Apple's relationship with Nuance if the deal happens, which differs from the conglomerate's substantial hardware business with Apple. Still, Apple likely has enough visibility to arrange an alternative if need be.

In this segment of Tech Teardown, Erin Kennedy discusses Nuance's rumored sale with Evan Niu, CFA.

(relevant segment begins at 8:24)

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Erin Kennedy owns shares of Apple. Evan Niu, CFA owns shares of Apple. The Motley Fool recommends Apple, Google (A shares), Google (C shares), and Nuance Communications. The Motley Fool owns shares of Apple, Google (A shares), Google (C shares), Microsoft, and Nuance Communications. 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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