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Voice: The User Interface for the Personal Assistant Age

BA is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The activity in the voice technologies space continues to heat up, making it loud and clear that voice, particularly natural language speech, is fast becoming an increasingly important user-interface mode.

Tech Crunch reported last week that Amazon (NASDAQ: AMZN) acquired True Knowledge, a British company that developed a personal assistant app for Apple’s (NASDAQ: AAPL) iOS and Google’s (NASDAQ: GOOG) Android called “Evi” using its internally developed natural language search technology plus licensed speech recognition technology from Nuance Communications (NASDAQ: NUAN). Nuance is the company involved in helping Apple develop Siri.

Nuance announced last week its collaboration with AutoNavi, a provider of digital maps and navigation and location-based solutions, to develop intuitive voice-enabled navigational products for the Chinese market. 

Nuance also made news earlier in April when investor-activist Carl Icahn acquired a 9.3% stake in the company.

What's up? Let's look at the possibilities and landscape...

Amazon's got two new gals: Evi and Ivona*

Evi isn't Amazon’s only new voice gal acquisition. In January, Amazon announced it was acquiring Ivona Software, the Polish text-to-speech company that provides the Voice Guide, Text-to-Speech, and Explore by Touch functions on Amazon’s Kindle Fire tablets. The news got little fanfare, likely because Amazon supply-chain acquisitions are nothing new; perhaps also because “the big Apple drop” was dominating tech stock news.

At that time, it seemed likely the acquisition was more significant than Amazon just wanting greater control over products currently used in its Kindle Fire. Now with the Evi news, there's little doubt. Amazon’s plans could include:

1. Entering the smartphone market, dominated by Android-powered phones and the iPhone, which together have about a 90% share of the U.S. market.

2. Beefing up functions on its Kindle Fire to compete in the more upscale market, dominated by Apple's iPad. (Amazon's M.O. is a razor/razor blades strategy, so selling a pricey device, AKA "razor," isn't likely.)  

3. Beefing up its cloud offerings by making Ivona’s portfolio of voices and languages available to enterprise customers. 

This one falls into a couple categories:  It could also offer a speech recognition API for developers to use in their apps for the Kindle Fire and future Amazon devices.

(*The female names are no coincidence; studies have shown most people find women's voices more pleasing, which is why they're often the default settings for devices.)

Speech: the next big thing in user-interface

Regardless of the exact motive(s), Amazon’s acquisitions are great moves. Speech is going to be the way we heavily interact with various tech devices in our homes, autos, and on our person in the very near future, in my opinion. (Though you won’t hear me proclaiming ‘the PC is dead,” as I do think traditional PCs with keyboards will be around for awhile. They’ll just continue to lose ground as the ‘best device’ or ‘most favored’ device for the task at hand.)

Apple has Siri, Google has Now (which it developed internally), Amazon needed an “Evi” and “Ivona” as we enter the personal assistant/robotics/artificial intelligence age. (IBM has Watson, but it’s a different beast – high-end, sophisticated AI geared toward enterprise, not the consumer market. Nuance has been working with IBM on its Watson commercialization efforts.)

Microsoft (NASDAQ: MSFT) has long been involved in developing voice technologies, both speech recognition and speech synthesis. Its technology is called Tellme. Its Office products have included speech recognition in them since the late '90s. And its Xbox Kinect uses speech as one natural user-interface mode; NUI modes include gesture, touch, and speech. So, along with Nuance and Google, Microsoft is very much a player in the voice technologies development space. 

Don’t take my word for the growing significance of speech as a user-interface. During Google’s Q1 conference call last week, CEO Larry Page's opening topic was Google Now and Voice Search. He could have opened with several topics, as Google has its hand in many tech cookie jars. Among his comments: “Voice commands are going to be increasingly important; it's just much less hassle to talk than type.”  For some uses, I'd tack on "or touch" to that statement.

Not only is it less of a hassle, it’s safer, given people are fiddling with gadgets and controls while driving. Additionally, speaking is more efficient for some uses. Typical typing speeds range from 25-40 words per minute, while average speaking rates range from 125-150 wpm. 

Will the flurry of activity finally get Nuance moving?

Here's the 5-year and 1-year stock price performance chart for Nuance. For context, included are the big techs that are working with or have worked with Nuance (IBM and Apple), have their own internal voice technologies (Google and Microsoft), or  -- in the case of Amazon -- are just entering the space.  

<img alt="" src="http://media.ycharts.com/charts/5499a535e0aaef1548b35b0a610e66dc.png" />


<img alt="" src="http://media.ycharts.com/charts/9cd98653cadbf61b88f909afd24c4a9c.png" />


I, too, have thought, “Nuance is working with the biggies, such as IBM and Apple, and has some key tech. Its financials generally have been moving in the right direction (though its growth has been via many acquisitions, which can be a concern), but the stock price has long struggled. When will it start a big, sustained move up?!" 

Part of the issue could be management-related. Carl Icahn apparently believes that’s the case; I can’t be sure. However, I believe part of the issue is simply time-related. While the tech world's speed can warp “regular time,” it’s only been relatively recent that voice technologies have entered the consumer tech mainstream. That began with Apple including Siri on its iPhone 4S, which was released in October 2011. Nuance has only been profitable from an EPS standpoint on a full fiscal year basis for two years. (However, both operating cash flows and free cash flows have been positive, and increasing, for many years. This is a good sign.)  

It seems likely that one of the big tech companies will buy Nuance, if not just for an offensive move, but also for a defensive one. I don’t know the timing of things, but had Apple snapped up Nuance awhile back, it’s likely there would be no “Evi” for Amazon to snap up. 

I believe the odds are darn good that Nuance's time has arrived. Though the potential threats from Google and Microsoft need to be monitored. If there is a management issue, the Icahn stake should help address that. 

Foolish bottom line

There’s no doubt that speech as a user interface with various devices, on-person and in-car and home, will become increasingly popular. 

Amazon's recent moves should bode well for the company. 

And it appears likely Nuance -- with its recently announced collaboration with AutoNavi and possible management kick in the pants from Icahn -- might soon live up to the potential many investors have long believed it possesses.  

BA McKenna has no position in any stocks mentioned. The Motley Fool recommends Amazon.com, Apple, Google, and Nuance Communications. The Motley Fool owns shares of Amazon.com, Apple, Google, Microsoft, 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. Is this post wrong? Click here. Think you can do better? Join us and write your own!

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