Greenberg: Nuance Epitomizes the Reality of Rollups

SAN DIEGO (TheStreet) -- At some point in time a rollup -- companies that grow by acquisition -- can't keep up the pace of acquisitions. It happens to the best of them and when it does you get what I like to call The Reset.

That's what appears to be happening to Nuance Communications (NUAN), the voice-recognition company and one of the the longest-running of all rollups. And like many rollups, when the acquisitions stop, so does the growth. Or put another way, the businesses it acquired aren't growing, either. Last quarter revenue growth at Nuance barely budged ahead at 1%. That compares with 8.8% the prior quarter and 27.7% the year before.


Worse, strip out more recent acquisitions organic growth tumbled by 9%. And, for what I believe is the first time, it was negative for each of the company's four segments.

And suggesting the commoditization of speech recognition, Nuance turned in an operating margin of just 2.6%, roughly half that of the quarter before and a fraction of the 12.8% a year earlier.

Perhaps most notable was mobile, which is believed to be the voice recognition power behind Apple's (AAPL) Siri. Mobile's organic growth plunged by 24%. There was a time, just a year or so ago, that Nuance was rising on the hope and hype of mobile, especially the iPhone. (Google's (GOOG) Android and Microsoft  (MSFT) use their own voice recognition technologies; Blackberry (BBRY) relied on Nuance but, well, you know how that has worked out.)

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