A Hidden Play on Apple’s iPhone 4S Success
Yesterday I explained how Apple’s inclusion of Siri in its iPhone 4S was the most game-changing feature in the new device.
And how it promises to take voice control technology to a whole new level – better than anything currently in the wild.
Well, today I want to tell you about a hidden opportunity in this technology. Because there’s one company that’s well positioned to benefit from Siri’s success once the iPhone 4S helps ramp up its adoption.
Hint: It’s not Apple.
So without further ado, here’s a quick rundown of why Siri’s technology is on track to dominate the speech input space. And how a seldom-discussed tech company stands to see the immediate upside…
Your Pocket-Sized Personal Assistant
For those of you not familiar with this voice control technology, Siri allows users to speak commands or ask questions to their smartphone as if they’re talking to a person.
Unlike previous versions of voice control, the Siri app understands what you mean in context and generates the appropriate response. It’s able to do this thanks to a highly advanced artificial intelligence.
For example, instead of saying, “Directions to Rockefeller Center,” like you would with an Android, you could ask, “How do I get to Rockefeller Center from here?”
As you can imagine, a futuristic technology like this has a lot of potential.
Problem is, in order to keep announcements like this as easy-to-understand as possible, Apple likes to ignore how the technology actually works. By saying phrases like “it just works” repeatedly, consumers forget that there’s a lot going on behind the scenes.
You see, the real company behind Siri’s astonishing speech decoding abilities – and the one set up to profit from its success with the new iPhone – is Nuance Communications (Nasdaq: NUAN).
The iPhone’s Unsung Hero
Nuance Communications holds more than a thousand patents in speech recognition. And it’s one of the top licensors of the technology.
As the company’s website says, “The eight-largest handset and 10-largest auto makers use Nuance solutions.” One of Nuance’s co-founders even developed Google’s voice control application.
But more importantly, Apple and Siri have licensed the technology.
As TechCrunch points out, “Siri does not work without Nuance. In fact, Siri was still using Nuance right up until Apple pulled the old standalone app from the App Store.”
So why didn’t Apple mention Nuance during the iPhone 4S launch?
Well, TechCrunch’s MG Siegler suggests, “Apple clearly struck a deal with Nuance which precludes them from talking about it… Apparently, Nuance is happy enough with Apple’s undoubtedly large check for this licensing agreement that they are willing to keep quiet.”
Regardless of the reason, we’re presented with an opportunity that’s hard to keep quiet about.
As Siri gains popularity – and I’m convinced it will – we can expect Nuance to be the first to profit as hardware makers scramble to get advanced speech input technology in their devices. Heck, they’ll have to if they want to stay competitive with Apple.
The fact that Nuance’s shares have climbed 15% since the day before Apple’s announcement (inching closer to a new 52-week high) suggests that a few investors have already caught on to the hidden potential here.
So if you decide to make a play on Nuance, I’d do it before the rest of Wall Street gets clued in.
Good investing,
Justin Fritz
Related Topics: Stocks, Tech & Innovation
