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Nuance helped pioneer what became Siri. Image source: Apple

Being able to communicate directly with an electronic device used to seem like a science-fiction dream. Thanks to companies like Nuance Communications (NASDAQ:NUAN), though, that dream became a reality, with voice-recognition software like Apple's (NASDAQ:AAPL) well-known Siri being staples of popular culture. Yet despite the widespread adoption of Nuance's software, the stock has suffered in recent years. Activist investor Carl Icahn has turned his attention to the company in the hopes that he can profit from the opportunities that Nuance has while encouraging its management to make better strategic decisions. With Nuance reporting fiscal fourth-quarter and full-year results on Monday, investors want to see if the company has made any progress in restoring its former growth.

As much as people recognize Siri, Nuance has a much more varied business than simply working with mobile devices. Nuance also provides products for other industries, especially healthcare information technology and records management, and it's also aiming to take a greater role in the budding Internet of Things. Let's take an early look at what's been happening with Nuance Communications over the past quarter and what we're likely to see in its report.

Stats on Nuance Communications

Analyst EPS Estimate

$0.27

Change From Year-Ago EPS

(10%)

Revenue Estimate

$510.79 million

Change From Year-Ago Revenue

4.2%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance

What's next for Nuance?
In recent months, investors haven't made any bold changes in their views on Nuance earnings, keeping their estimates for fiscal 2014 and 2015 unchanged. The stock has continued to languish, though, falling another 11% since mid-August.

Nuance Communications didn't produce huge results in its third-quarter report, with overall revenue climbing just 1.2% from the previous year. Adjusted net income continued its downward trend, with earnings per share weighing in at $0.27. Although Nuance enjoyed better sales in its healthcare segment, the company suffered declines in its other business lines, including a 9% decline in mobile and consumer sales. Even more discouragingly, Nuance gave guidance that compared unfavorably with what investors were expecting from the voice-recognition specialist, again noting the disparity between a strong healthcare business and weakness elsewhere.

Part of the declines in Nuance's financial numbers stems from the fact that the company has shifted from one-time licensing revenue to recurring subscription-based terms. That shift will hit Nuance hard at first, but it promises greater streams of recurring revenue into the future as long as the company can entice customers to take advantage of its services. With roughly two-thirds of Nuance's business now subscription-based, investors can expect to see the negative impact from the shift start to slow in the quarters to come.

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Dragon TV makes voice activation possible. Source: Nuance Communications

Yet another key question that Nuance needs to answer is what its key customers are likely to do strategically in the future. Despite having originally developed Siri with Nuance's help, many expect Apple to bring further Siri development in-house. Meanwhile, rumors that Samsung might buy out Nuance have encouraged many speculators to look closely at the stock, but thus far, no takeover bid has been forthcoming, and Nuance shares have slumped as impatient investors give up on the prospects for a buyout.

In addition, Carl Icahn's plans for the company remain uncertain. In October, Icahn said that he intended to send a letter to Apple, which many investors interpreted as trying to encourage Apple to buy out Nuance. Yet when the letter didn't say anything about Nuance, shareholders' hopes were dashed yet again, and the stock moved back downward.

In the Nuance Communications earnings report, look behind the headline numbers to see what if any comments the company's management makes with respect to its longer-term strategy. Without a convenient buyout to help investors salvage what has been disappointing performance in recent years, Nuance needs to demonstrate its ability to move forward on its own and find new opportunities to turn into profit growth in the future.

Dan Caplinger owns shares of Apple. The Motley Fool recommends Apple and Nuance Communications. The Motley Fool owns shares of Apple and Nuance Communications. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.