ScanSoft (NASDAQ:SSFT) did something very unusual: On Monday, it announced it was buying three companies. OK, these were not megadeals -- amounting to just under $100 million. Then again, they were certainly big deals in comparison with ScanSoft's $367 million market cap.
ScanSoft is a software developer for speech technologies that enable voice-activated services. And, yes, through its recent flurry of deals, the company is bolstering its position in the speech arena.
Among the deals was the purchase of Phonetic Systems, Ltd., which has speech recognition products for the telecom marketplace -- focusing on directory assistance services. Customers include biggies such as JP Morgan (NYSE:JPM), Motorola (NYSE:MOT), Novartis, and Procter & Gamble (NYSE:PG).
Then there was the deal to buy ART Advanced Recognition Technologies, Inc., which focuses on embedded speech and handwriting for wireless mobile devices. More than 30 manufacturers use ART's technology in more than 40 million devices.
And, finally, ScanSoft bought Rhetorical Systems, Ltd., which develops software for text-to-speech solutions. The company has deals with companies such as Verizon (NYSE:VZ) and Coca-Cola (NYSE:KO).
A day after these announcements, ScanSoft released its earnings report. Unfortunately, investors were disappointed as the stock price plunged nearly 16% to $3.48.
In the third quarter, the company posted revenues of $42.3 million, which was a 29% increase over the same period a year ago. Unfortunately, the company increased its net loss from $3.7 million to $5.9 million during this period.
ScanSoft's acquisitions make strategic sense -- adding critical technologies and big customers. Yet the company has only $47.7 million in the bank, so its finances will definitely be stretched. There are also the difficulties of integrating these diverse deals. Then again, given its recent sub-par performance, it probably has no choice but to buy growth.
Fool contributor Tom Taulli does not own share mentioned in this article.
