SAN FRANCISCO -- Nuance Communications (NUAN) raised its fourth-quarter financial projections Wednesday, while also making a major foray into Europe.The company now expects revenue -- including an acquisition-related contribution that will be written down -- to range between $258 million and $262 million. Nuance previously projected $255 million to $262 million. Analysts were expecting $259 million, according to Thomson Reuters. Nuance expects to report a loss of a penny to two cents a share. Previously, the company projected a loss of 2 cents to 3 cents a share. Excluding special items, EPS will be 25 cents to 26 cents, a penny higher than previous estimates. Analysts had projected earnings of 24 cents a share. Shares were up $1.03, or 8.5%, to $13.22 in recent trading. The company, which sells speech-processing software to the healthcare industry, also announced the acquisition of Philips Speech Recognition Systems, a unit of Royal Philips Electronics ( PHG), for $96.1 million. The Philips unit, which addresses the European healthcare sector with speech software in 25 languages, broadens Nuance's language portfolio. The acquisition expands the company's European customer base and is expected to sharply raise operating margin in Nuance's healthcare business unit, according to the company. "Our sustained performance of positive cash flows in the fourth quarter and projected cash flows in fiscal year 2009 give us confidence in funding this acquisition with cash," CFO Tom Beaudoin said in a statement. Nuance paid one-third of the acquisition price in cash for the Philips unit. The remaining two-thirds will be paid in cash on Sept. 21, 2009. The unit is expected to contribute between $36 million to $39 million to Nuance's revenue in fiscal 2009. Including revenue that will be lost to purchase accounting, the Philips contribution to revenue will be $37 million to $40 million.
Excluding special items, Philips will add 2 cents to 3 cents to EPS in 2009. Analysts were expecting Nuance to post 2009 revenue of $1.11 billion and EPS, excluding items, of $1.02. The company said its pace of acquisitions would slow in the coming year. "We believe that sellers will need time to recalibrate appropriate valuation in this more difficult equity market," Beaudoin said. Nuance completed the acquisition of software developer eScription in May and of five other companies in 2007. Nuance is the leading standalone provider of speech processing software, used in telecommunications, as well as healthcare. Its primary competition comes from Microsoft ( MSFT), IBM ( IBM) and AT&T ( T).