Will the iPhone 6 Lose Siri's Greatest Asset?

The Wall Street Journal is reporting that the company behind Apple's voice recognition for Siri may be for sale. 

Earlier this week The Wall Street Journal reported that Nuance Communications (NASDAQ: NUAN  ) -- the company behind the voice recognition software for Apple's (NASDAQ: AAPL  ) virtual assistant -- may be in talks with Samsung (NASDAQOTH: SSNLF  ) about a buyout. While no deal has reportedly been made, this potential acquisition would have several implications for Apple.

Siri relies on Nuance Communications' technology. Source: Apple.

Multiple outcomes
Let's assume for a moment a deal is reached in which Samsung becomes the sole owner of Nuance. The Wall Street Journal report, combined with the fact that Nuance already provides voice recognition software for Samsung's mobile devices, TVs, and now wearables, make this a plausible scenario. If that happened, Apple could lose the ability to use Nuance's voice recognition services for Siri, which would leave the iMaker either searching for new company to fill the void or forced to bring the tech in-house.

Even if that scenario played out, it's not likely the upcoming iPhone 6 would lose Nuance's technology just yet. Right now, it appears Nuance is only having conversations with potential buyers, which means any existing contracts -- such as voice recognition for the iPhone 6 -- would remain intact.

We can then extend this idea a bit further. If it's safe to assume the iPhone 6 will keep the same Siri listening software, even if a Samsung buyout occurs soon, then it's also possible that Apple has an existing long-term contract in place. Since neither Apple nor Nuance have shared such information, we obviously don't know, but Apple has been using Nuance since the iPhone 4s and it's plausible the two companies have signed a multiyear or multidevice contract.

Lastly, and just as likely, there might be no deal and things could continue exactly as they are right now.

So what does all this mean?

Foolish final thoughts
Talk of a possible Samsung acquisition of Nuance brings up longtime questions regarding why Apple never snatched up Nuance. Apple typically likes to pick up small companies and then utilize their tech and talent for itself. And while Nuance would have been a rather large purchase for Apple, this purchase would have fit well with Apple's modus operandi. With the company so integrated into Apple's mobile devices, it's a bit surprising that never happened.

Obviously, even if Samsung or another company picks up Nuance, Siri isn't going anywhere. For investors, the thing to watch would be how Apple's voice recognition strategy would play out if an acquisition does occur. Since Apple doesn't own Nuance I'm sure the company has already planned for such a scenario. But Samsung bringing the tech completely under its roof could give it an advantage over Apple, considering that Android's voice commands are already an integral part of the mobile OS, and in many ways trump Apple's own virtual assistant. Ultimately, I wouldn't be too worried about these rumors, but it would be wise for Apple investors to keep tabs on any new developments. 

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Comments from our Foolish Readers

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  • Report this Comment On June 18, 2014, at 9:57 AM, twolf2919 wrote:

    "Talk of a possible Samsung acquisition of Nuance brings up longtime questions regarding why Apple never snatched up Nuance" - well, maybe you answered your own question earlier in the piece: perhaps Apple DOESN'T NEED TO, because maybe it signed a contract with Nuance that will give it perpetual rights to Nuance's voice-to-text IP.

    You say that acquiring NUAN would be in line with Apple's modus operandi of buying small companies and then utilizing its tech and talent - but earlier in the same sentence you admit that NUAN is not a small company (and, thus, its team couldn't really be integrated easily into Apple's culture). So, how does it still fit with Apple's "modus operandi"??

    It would be interesting to have someone do a real analysis on this and research what other speech-to-text companies are out there. Google obviously has speech-to-text - do they use in-house tech or use another vendor's IP? If it's the former, then obviously Apple could develop its own too, if necessary. If it's the latter, Apple could look into signing a deal with that company. The speech-to-text component of Siri is just one small - but vital - part of what Siri does.

  • Report this Comment On June 18, 2014, at 10:49 AM, makelvin wrote:

    @twolf2919, you are so right. The voice recognition is only a small part of Siri; but many people always assume that the voice recognition is what Siri is about. In actuality, Siri is really about contextual understanding of language using AI. All Nuance's voice recognition does is to convert the speech into text. Once it is in text form, that is when Siri part truly begins. It needs to parse the text and try best to understand what the user meant and truly wants Siri to do. This is why Siri does not need to use any fixed word commands in order for it to operate unlike many of its counterparts like XBox's Kinect or others. This is why it always bothers me when people say Nuance is the backend that powers Siri when it fact, Nuance's voice recognition is the frontend before it even gets to Siri.

    Voice recognition technology has been around for a long time; at least a few decades. Besides Google, Microsoft also have the voice recognition part in-house as well. Clearly, Nuance has been doing it for awhile. It is also possible that Nuance's licensing fee and terms were very reasonable to Apple that Apple did not feel the need to have the voice recognition part in-house. This allows them to focus more on the other technology they prefer to do. But I think if it comes down to it, it would definitely not be insurmountable for Apple to take that on themselves if need be. I am sure that certain contract is in place that if Nuance does get acquired by Samsung, Apple will have plenty of time to take the voice recognition part in-house or find someone else.

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Chris Neiger

Chris has covered Tech and Telecom companies for The Motley Fool since 2012. Follow him on Twitter for the latest tech stock coverage.

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