What Apple should do with some of its cash -- buy Nuance

Apple is holding a conference call today to discuss its investment plans. Wall Street has been critical of Apple and the massive $100 billion cash reserves it is sitting on, recommending it invest some of that capital. Whatever Apple ends up doing with the cash, if anything, there is one investment it could make that would benefit the company across its entire product line. A purchase of Nuance Communications would be a smart use of that cash.

Nuance Communications is the company behind sophisticated voice recognition technology in use on every major platform. Its flagship product is the Dragon NaturallySpeaking program, available on most platforms including Apple's OS X. There are professional variants of this program that bring sophisticated speech recognition to the legal and medical fields. Nuance technology is used on most mobile platforms, and also in voice command systems in automobiles.

A purchase of Nuance by Apple would put the latter in control of the top player in speech recognition, a technology that is playing a bigger role in the mobile space than ever before. The Nuance technology is rumored to be behind the Siri dictation system, further reason an acquisition is a good fit for Apple.

TechCrunch reported last year that Apple was rumored to be getting into some sort of partnership with Nuance, but nothing was ever made public if so. That rumor ruled out an acquisition of Nuance due to its high market cap.

The current market cap of Nuance, $8.06 billion, would make an acquisition an expensive proposition but Apple has plenty of cash lying around to do it. The deal would give Apple total control over its voice technology, including Siri, and that is important to the company. It would also put Apple in the driver's seat over Nuance's technology that is used by most everybody in the mobile sector. That would make Apple the company to deal with for all speech technology going forward.

Apple is looking to get the iPad into the enterprise, and a Nuance purchase would give it tremendous leverage in both the legal and medical fields. These are two logical sectors for Apple to target with the iPad, and a merger could grease the skids for such an effort. There may be no down side to an Apple buyout of Nuance, making it a great investment. Apple would still have most of its cash left over.

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