Swype CEO Mike McSherry Explains His $100 Million Deal With Nuance

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Last night, Michael broke the news that TechCrunch50 alum Swype was acquired for $100 million by speech technology company Nuance. The exact number was $102.5 million and, I’ve learned, it was all cash (split between $77.5 million up front and another $25 million in 18 months—call that a retention bonus for the Swype team).

So what does Nuance, which is known primarily for its speech recognition software engine, want with a gesture-based text entry technology like Swype? (Instead of tapping in letters on a touch keyboard, you swipe between them without lifting your finger). Earlier today, I spoke with Swype CEO Mike McSherry, who explained the thinking behind the deal. “The broadest vision,” says McSherry, “is we want to be the input for every single stream. You talk to your refrigerator and in-car navigation, you want your language models to follow you around.”

When he puts it that way, Swype seems like a much more strategic acquisition for NUance than one which simply fills a hole. Nuance owns key pieces of technology for entering information onto mobile phones via both voice and touch (including the T9 text prediction algorithm used on most feature phones). In fact, Swype co-founder and CTO Cliff Kushler was also the inventor of T9. The t( offices are five blocks away from Swype’s in Seattle. The two code-bases will be merged, but the Swype brand will grow larger in importance.

Nuance is thinking beyond the input technologies people interact with on their mobile devices to tying them together in the cloud. So it doesn’t matter whether you use voice or Swype, Nuance will “share language models on the backend” and personalize each experience to an individual’s frequency of use and language patterns. So if your mobile phone learns how you spell your friend Sergey’s name and later you use voice recognition to send Sergey a text message, it will have a better chance of knowing that you mean Sergey and not Sergei.

Yes, Nuance is powering the new Siri Assistant in Apple’s upcoming iPhone 4S with its voice recognition technology. So does that mean that Swype could be coming to the iPHone as well? “I’d love to be able to see that,” says McSherry, adding, “There are certainly lots of requests to see Swype on the iPhone.” Maybe Nuance can help with the negotiations. As of now, Swype is on 19 million phones overall, including 9 of the top 11 phone manufacturers. It is especially big on Android. Bringing it to the iPhone would be a very popular move all around.

Here’s a demo video from a couple years ago comparing Swype (on a Windows phone) to tapping on an iPhone keyboard.