Nuance Communications (NUAN) will release its quarterly report on Monday, and investors are still nervous after the big plunge in the company's shares back in November following the company's last earnings release. Yet, even as Nuance has had to deal with activist investor Carl Icahn, the voice-recognition specialist has sought to go beyond its prestigious relationship with Apple (AAPL 1.12%) to come out with other innovative products that can set it apart from its competitors and make it less reliant on any single customer.

Nuance is best known for its Siri voice-recognition program on Apple's iPhones. But the company makes plenty of other products, as well, ranging from Dragon TV systems that utilize voice biometrics to next-generation voice-activated interfaces for car and truck drivers. As technology progresses, Nuance has plenty of opportunities to boost its profits, even as it goes through a transition phase with its revenue arrangements that has pressured its revenue lately. Let's take an early look at what's been happening with Nuance Communications during the past quarter, and what we're likely to see in its report.

Nuance's Dragon TV. Source: Nuance Communications.

Stats on Nuance Communications

Analyst EPS Estimate


Change From Year-Ago EPS


Revenue Estimate

$485.15 million

Change From Year-Ago Revenue


Earnings Beats in Past 4 Quarters


Source: Yahoo! Finance.

Will Nuance earnings grow faster this quarter?
In recent months, analysts have cut their views on Nuance earnings, reducing their December-quarter estimates by a third, and shaving between 19% and 23% from their full-year fiscal 2014 and 2015 projections. The stock has given up ground in response, falling 4% since early November, but recovering from much larger losses.

Nuance's September quarter results showed how sensitive shareholders are to disappointing guidance. The company posted better adjusted revenue and earnings than investors had expected for the quarter, but its December-quarter projections fell well short of the prevailing projections among analysts. Even though Nuance argued that part of the shortfall stems from its move toward subscription and term-based pricing models rather than one-time perpetual license purchases, investors punished the stock, sending it down 18%.

But Nuance has already given investors a more positive view of what happened more recently, with preliminary guidance for the December quarter late last month leading to a big jump in the stock. Although the increases in its sales and earnings guidance weren't enough to fully restore investors' expectations back to their pre-November levels, they nevertheless suggested that Nuance is doing a good job of navigating a difficult environment for technology companies generally.

Still, Nuance faces some major threats. Google's (GOOGL 1.08%) recent acquisition of DeepMind Technologies could give the online-search giant greater capabilities in artificial intelligence, helping to turn its Google Now voice-search application into a vital part of its Android ecosystem. Nuance has responded with its Project Wintermute artificial-intelligence system, which is aimed at becoming a cloud-based app for multi-platform use across smartphones, tablets, televisions, and other Internet-connected devices.

In the Nuance earnings report, take a close look at the company's lesser-known health-care business. With so many high-margin opportunities available in that industry, Nuance's future growth there could help give investors greater comfort that it won't be entirely reliant on mobile-device-related revenue in the future.

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