Nuance Communications is a major holding in Carl Icahn's bulging portfolio.

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Nuance Communications (NASDAQ:NUAN) stock soared in June, as The Wall Street Journal cited some juicy buyout rumors. With activist investor Carl Icahn holding a 19% stake and pushing for a lucrative exit strategy from the software company, Nuance was said to have discussed its future with Korean electronics giant Samsung. This would make sense, as Nuance provides voice recognition and optical character recognition functions to many mobile devices, which is a market where Samsung swings a heavy hammer.

But the excitement started to fade as these rumors failed to produce a solid buyout bid. And when Nuance reported third-quarter results this week, Samsung's name didn't even come up in discussion on the conference call. This lack of deal-making buzz was paired with merely adequate financial results, and the stock dropped back to prices not seen since early June.

The third quarter wasn't a huge success, mind you. Sales rose 1.2% year over year, to $475.5 million. Adjusted sales, which incorporate the negative effects of some accounting treatments related to Nuance's own acquisitions, fell 0.8%. Either way, sales fell about 4% short of analysts' expectation set at $500 million.

On the bottom line, adjusted earnings fell 21% to land at $0.27 per share. This was in line with the Street view, but hardly a rousing win.

Sales increased year over year in Nuance's bread-and-butter healthcare segment. The other three divisions all reported falling sales, led by a roughly 9% drop in the mobile and consumer segment. These trends hold true whether you're looking at straight-up generally accepted accounting principles sales or adjusted figures.

What's next?
Looking ahead, Nuance set fourth-quarter earnings and revenue guidance ranges below the current Street view. Management highlighted strong order bookings in the healthcare and automotive markets, undermined by slower order flows elsewhere.

Adding to Nuance's revenue pressures, the company is revamping its business model. Traditionally, Nuance simply sold perpetual software licenses. Like many software developers, the company is now moving to a subscription-based model. In the third quarter, 65% of Nuance's sales had moved over to the recurring revenue model.

Management said this strategy shift is progressing faster than expected, which is good for long-term sales but hangs an anchor around the neck of current-quarter sales.

Icahn is still looking to unlock the value he sees in Nuance, like any other common shareholder. Investors should keep an eye on Nuance's subscription-based revenue shift and keep an ear to the ground for the next wave of buyout rumblings.

In the meantime, even seasoned Nuance observers are becoming frustrated with the company's inscrutable business model. "Even after following this company for 56 quarters, these guys don't make it easy for outsiders to figure out what's going on inside what appears to be a black box," said Canaccord Genuity analyst Richard Davis.