Nuance Communications' Losses Widen

The speech-software company suffered bigger losses in the third quarter but managed to beat estimates.
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Updated from 4:38 p.m. ESTSAN FRANCISCO - Nuance Communications (NUAN) - Get Report edged past third-quarter earnings estimates and raised its full-year EPS projection Monday.

Revenue at the Burlington, Mass. speech-software company rose 46% year over year to $229.2 million, including $12.5 million in acquisition-related writedowns. Revenue for the same quarter of last year was $157 million. Analysts polled by Thomson Reuters were expecting a top line of $232.3 million.

Due to acquisition-related amortization and restructuring charges, net loss grew to $9.9 million, or a loss of 5 cents a share, vs. a loss of $7.6 million, or 4 cents a share, in the year-ago period.

Excluding special items, EPS was 22 cents, a penny better than analysts' expectations.

Dragon product revenue was down 23% year over year, to $10.5 million, due to a "transitory factor" as some customers decided to wait for the new software release, Ricci said.

On-demand, or hosted, software revenue grew organically at the rate of 42% year over year for the third quarter.

Shares were down 60 cents, or 3.4%, to $17.29 in extended trading.

For the fourth quarter, Nuance executives projected revenue of $255 million to $262 million, excluding special items, and EPS of 24 cents to 25 cents. Analysts were expecting revenue of $258.4 million and EPS, less items, of 24 cents.

For the full year, the company reaffirmed prior guidance for revenue ranging from $913 million to $920 million, excluding charges, but raised earnings guidance to 82 cents to 83 cents a share. The company had previously projected EPS, excluding items, of 80 cents to 82 cents. Analysts were looking for revenue of $919.6 million and EPS of 81 cents.

Chairman and CEO Paul Ricci said fourth-quarter performance will be driven by the launch of a new version of its Dragon NaturallySpeaking software, continued growth in its hosted services, the recent introduction of Mobile Care software for telecom carriers, and improving operating margins. Nuance expects an operating margin of 28% for the fourth quarter, from a margin of 27% for the quarter just ended.

Nuance is a standalone software company in a field dominated by technology giants.

Microsoft

(MSFT) - Get Report

acquired speech software competitor TellMe in 2007.

IBM

(IBM) - Get Report

licenses its ViaVoice speech software to Nuance for desktops.

With its acquisition of eScription, Nuance competes with

Philips'

SpeechMagic software for medical transcription.