Why Nuance Communications, Inc. Popped Today

Is Nuance's jump meaningful or just another movement?

Steve Symington
Steve Symington
Jun 16, 2014 at 4:10PM
Technology and Telecom

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of Nuance Communications (NASDAQ:NUAN) rose more than 11% early Monday following news the voice and language software specialist recently held talks with potential buyers to sell the company.

So what: Citing "people familiar with the matter," The Wall Street Journal reported (may require subscription) that Nuance has held talks with both Samsung and several private equity firms to explore a sale. Closing a deal with the former suitor would be particularly interesting considering Nuance's technology powers Apple's Siri virtual assistant. Still, it wouldn't be entirely surprising as Nuance's solutions are also used in Samsung's various electronic devices.

Now what: However, I certainly wouldn't be willing to base my entire investment thesis for Nuance Communications on an acquisition as a sure thing. And despite the fact that Nuance isn't profitable on a trailing-12-month basis, this would require some relatively deep pockets given Nuance's roughly $6 billion market capitalization. Still, picking up Nuance at the right price could make plenty of sense for the right buyer, and shares do look reasonably valued trading around 15 times next year's expected earnings. One way or another, I think Nuance could very well be set to reward patient investors going forward.