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A sputtering economy, implosions at financial institutions, or just plain bad management -- on any given day, investors can name a number of reasons to sell a stock. Yet while panic is never beneficial to investors, it's good practice to play devil's advocate with investments from time to time.
In Motley Fool CAPS, more than 120,000 members have weighed in on more than 5,400 stocks, sharing bullish and bearish opinions alike.
In the case of leading speech recognition firm Nuance Communications (Nasdaq: NUAN ) , a total of 5,585 members have weighed in on its chances of success. I've already plucked out some of the bullish rationale backing Nuance today, so here are three counterpoints to consider, courtesy of CAPS:
No Profits: While the company has continued to grow by signing deals with Nokia (NYSE: NOK ) and joining companies like Marvell Technology (Nasdaq: MRVL ) in getting on board with Google’s (Nasdaq: GOOG ) Android smartphone platform, it’s still churning out losses. Losses in its 2008 fiscal third quarter grew to $9.9 million from last year's $7.6 million, and even though it raised its fourth-quarter earnings outlook, it still expects a $0.01-to-$0.02-per-share loss.
Costly Acquisitions: Nuance is trading future opportunity with dilution to its current shareholders. Paying for its numerous acquisitions has also eaten into margins, and it expects its all-stock acquisition of SNAPin to reduce 2009 earnings by $0.05 to $0.06 per share.
Lack of focus: Some believe the company has spread itself over too many highly competitive markets and that it might have trouble remaining competitive as big players with plenty of resources on hand -- like Microsoft (Nasdaq: MSFT ) and IBM (NYSE: IBM ) -- make a big push into speech recognition technology. Document mainstay Adobe (Nasdaq: ADBE ) is also stacking up against Nuance's document solutions with its full suite of PDF creation and management tools.
Of course, Nuance has survived and thrived despite dozens of obstacles. But the question about whether the company can do so profitably going forward is why CAPS is such a great resource to augment your own analysis.