ScanSoft and Nuance Team Up on Speech Apps

Speech software rivals Scansoft Inc. and Nuance Communications Inc. are teaming up to fight off challenges from enterprise IT heavyweights Microsoft Corp. and IBM.

ScanSoft, of Peabody Mass., said last week it will pay $221 million to acquire its Menlo Park, Calif., rival, Nuance.

“As the speech business has grown, it has attracted a lot of people, like IBM and Microsoft, who are investing heavily and making a lot more noise. We saw them long term as our biggest, most meaningful competitors, so were joining forces with Nuance to create a combination of deeply specialized expertise and broad resources,” said ScanSoft spokesperson Peter Mahoney.

The combined companys resources will bring enterprises more innovative products in such areas as call centers, directory assistance, dictation and mobile phones, as well as better services to support those products, said Mahoney.

Industry insiders agreed that the merger would help enterprises ease the pain of evaluating speech deployments.

“On the enterprise side, some sort of unified front has to emerge to make the purchase decision simpler,” said analyst Dan Miller, with Opus Research Inc., in San Francisco.

The merger will also bring the combined company a savings of $20 million to $25 million, through cutting some of the companies roughly 1,100 employees, consolidating office sites and eliminating duplicate operating expenses, said Paul Ricci, ScanSofts chairman and CEO, during a conference call last week. Ricci predicted combined revenue of between $315 million and $320 million for the year ending September 2006.

Ricci will stay on as chairman and CEO, while Nuance President and CEO Chuck Berger will join ScanSofts board of directors.

Pending shareholder and regulatory approval, the deal is expected to close this September. The combined company will take the Nuance name, moving ScanSoft beyond its roots as a document-scanning company.

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