Apple May Not Have Bought Nuance But…


This past November, the blogosphere was briefly set on fire when a comment Apple co-founder Steve Wozniak made in passing stated that Apple had acquired the voice recognition company Nuance. Wozniak quickly came out and corrected that comment, and most believed that he had simply confused Nuance with the company he mentioned right afterwards, Siri — a company that Apple actually did acquire in April 2010. But as it turns out, Wozniak’s comment, whether he knew it or not at the time, may not have been as off as it seemed.

Apple has been negotiating a deal with Nuance in recent months, we’ve heard from multiple sources. What does that mean? Well, it could mean an acquisition, but that is looking fairly unlikely at this point, we hear. More likely, it means a partnership that will be vital to both companies and could shape the future of iOS.

For those in the know, this shouldn’t be too surprising. Buried under all the original bluster about Apple/Nuance was a very important fact: Siri relies on Nuance technology for its services. While they initial used Vlingo after launch, Siri quickly switched to Nuance for a number of reasons — one being that both came out of Stanford Research Institute, the other being that Nuance is just considered to be better. They used Nuance up until the Apple acquisition, and in fact, they’re still using Nuance right now.

This matters because as we first reported in March, Siri technology is expected to be a big part of iOS 5. By extension, that means that Nuance technology will be a big part of iOS 5. Well, unless Apple ditches them and goes with another option — but again, Nuance is considered the best. The other big player here getting praise is Google. But well… Yeah.

The other option is for Apple to build the technology themselves. And some recent job postings suggest they may be thinking about that. But to get to where Nuance is today it would take a long, long time. Perhaps more importantly, it’s well known in the industry that Nuance holds key patents for their technology and is very aggressive in protecting them. Even Apple would have a hard time dancing around this if they did go it alone.

(As an interesting sidenote, you may wonder how Google has been able to develop their technology while dancing around Nuance’s patents?Well, it certainly helps that Mike Cohen, an original co-founder of Nuance who worked there for 10 years, went on to create the voice-recognition technology for Google. If anyone knows how to navigate those waters, he’s the guy. And it has worked.)

So why doesn’t Apple just bite the bullet and buy Nuance? Well, for one thing, the company is very expensive. Nuance is a public company whose stock just so happens to be near its all-time highs. At the time of the original Apple/Nuance talk, their market cap was around $5 billion. Now it’s $6 billion. And it would take considerably more than that for Apple to buy them.

Of course, as we’re all well aware, Apple has the cash to do that. With $60 billion or so lying around, a Nuance deal would make a dent, but Apple would still have more cash than just about every other company after such a deal. The bigger issue, it seems, is that Nuance are very hard bargainers.

After Apple acquired Siri, they had to renegotiate deals with all of Siri’s partners to ensure the service remained alive and vital. That was easy to do with most of them (companies like OpenTable, for example). But one held out. And from what we hear, they’re still holding out. Guess who?

Nuance CEO Paul Ricci can be as hard of a negotiator as Apple’s own Steve Jobs, we hear. And so there has been a standoff, and negotiations have been ongoing for months.

Again, from what we’re hearing, all types of possibilities are still on the table, including an acquisition. But again, that’s not as likely as an expansive licensing agreement at this point. In buying Nuance, Apple would immediately screw over several other competitors that use the technology and it would bolster their position. And given what Google has been building, it seems unlikely that the government would have a big problem with the buy.

It would also give Apple something they always desire when possible: complete control over the technology on their devices.

But those who know Apple, and Jobs in particular, will know that they’ll be damned if they’re going to overpay for something. And they’d have to for Nuance. Much of Nuance’s value is derived from the licensing deals they have in place, and if Apple bought them, those deals would dry up. Apple would have to think of it as a strategic investment rather than a value play.

So maybe instead they do an expansive licensing deal now and perhaps quietly work on their own stuff in the background — sort of like what they did with Skyhook/Google for location services. (And what they’re now believed to be on the verge of doing to Google for maps.) But that’s pure speculation on my part.

Regardless, the fact remains that Apple needs Nuance for what they’re believed to be working on for iOS 5. And while the OS isn’t likely to appear until the fall, as we first reported last month, it is likely to be unveiled or talked about with developers at WWDC next month. You’d think Apple would want to have any deal with Nuance to be done by then.

And the truth is that Nuance needs Apple too. Not only are they also threatened by Google, but Nuance technology is simply not very meaningful without apps that utilize it like Siri. And many of those apps are appearing guess where: iOS.

While Siri has been categorized by many as a voice recognition service, that’s not actually the case. Technically, that element is on Nuance’s end. Siri are the ones that do the cool stuff with the transcriptions Nuance creates. Nuance, of course, knows this and has been trying to expand their offerings into the “brain” end of things. And it should surprise absolutely no one that they had tried multiple times to acquire Siri before Apple eventually did.

That’s not to downplay Nuance though. As one source puts it, “voice recognition done well is actually non-trivial, and although it is just ‘input’, you win or lose on it.”

In other words, both sides need each other. Nuance needs Apple. And Apple needs Nuance.

“I think voice recognition is going to become more and more a big part of these machines. Apple’s probably thinking the same way,” Wozniak said immediately before he dropped the Nuance bomb last November. From what we’ve heard, Apple is indeed thinking that way. And so are many others, including main rival Google. Nailing this on the technology side of things is going to be very, very important.

So while Wozniak may have misspoke, he may have done so with slightly more knowledge than he let on. Expect to hear a lot more about Apple and Nuance soon.

UpdateApple’s Massive New Data Center Set To Host Nuance Tech; Partnership Announcement Due At WWDC

More TechCrunch

Ahead of the AI safety summit kicking off in Seoul, South Korea later this week, its co-host the United Kingdom is expanding its own efforts in the field. The AI…

UK opens office in San Francisco to tackle AI risk

Companies are always looking for an edge, and searching for ways to encourage their employees to innovate. One way to do that is by running an internal hackathon around a…

Why companies are turning to internal hackathons

Featured Article

I’m rooting for Melinda French Gates to fix tech’s broken ‘brilliant jerk’ culture

Women in tech still face a shocking level of mistreatment at work. Melinda French Gates is one of the few working to change that.

10 hours ago
I’m rooting for Melinda French Gates to fix tech’s  broken ‘brilliant jerk’ culture

Blue Origin has successfully completed its NS-25 mission, resuming crewed flights for the first time in nearly two years. The mission brought six tourist crew members to the edge of…

Blue Origin successfully launches its first crewed mission since 2022

Creative Artists Agency (CAA), one of the top entertainment and sports talent agencies, is hoping to be at the forefront of AI protection services for celebrities in Hollywood. With many…

Hollywood agency CAA aims to help stars manage their own AI likenesses

Expedia says Rathi Murthy and Sreenivas Rachamadugu, respectively its CTO and senior vice president of core services product & engineering, are no longer employed at the travel booking company. In…

Expedia says two execs dismissed after ‘violation of company policy’

Welcome back to TechCrunch’s Week in Review. This week had two major events from OpenAI and Google. OpenAI’s spring update event saw the reveal of its new model, GPT-4o, which…

OpenAI and Google lay out their competing AI visions

When Jeffrey Wang posted to X asking if anyone wanted to go in on an order of fancy-but-affordable office nap pods, he didn’t expect the post to go viral.

With AI startups booming, nap pods and Silicon Valley hustle culture are back

OpenAI’s Superalignment team, responsible for developing ways to govern and steer “superintelligent” AI systems, was promised 20% of the company’s compute resources, according to a person from that team. But…

OpenAI created a team to control ‘superintelligent’ AI — then let it wither, source says

A new crop of early-stage startups — along with some recent VC investments — illustrates a niche emerging in the autonomous vehicle technology sector. Unlike the companies bringing robotaxis to…

VCs and the military are fueling self-driving startups that don’t need roads

When the founders of Sagetap, Sahil Khanna and Kevin Hughes, started working at early-stage enterprise software startups, they were surprised to find that the companies they worked at were trying…

Deal Dive: Sagetap looks to bring enterprise software sales into the 21st century

Keeping up with an industry as fast-moving as AI is a tall order. So until an AI can do it for you, here’s a handy roundup of recent stories in the world…

This Week in AI: OpenAI moves away from safety

After Apple loosened its App Store guidelines to permit game emulators, the retro game emulator Delta — an app 10 years in the making — hit the top of the…

Adobe comes after indie game emulator Delta for copying its logo

Meta is once again taking on its competitors by developing a feature that borrows concepts from others — in this case, BeReal and Snapchat. The company is developing a feature…

Meta’s latest experiment borrows from BeReal’s and Snapchat’s core ideas

Welcome to Startups Weekly! We’ve been drowning in AI news this week, with Google’s I/O setting the pace. And Elon Musk rages against the machine.

Startups Weekly: It’s the dawning of the age of AI — plus,  Musk is raging against the machine

IndieBio’s Bay Area incubator is about to debut its 15th cohort of biotech startups. We took special note of a few, which were making some major, bordering on ludicrous, claims…

IndieBio’s SF incubator lineup is making some wild biotech promises

YouTube TV has announced that its multiview feature for watching four streams at once is now available on Android phones and tablets. The Android launch comes two months after YouTube…

YouTube TV’s ‘multiview’ feature is now available on Android phones and tablets

Featured Article

Two Santa Cruz students uncover security bug that could let millions do their laundry for free

CSC ServiceWorks provides laundry machines to thousands of residential homes and universities, but the company ignored requests to fix a security bug.

2 days ago
Two Santa Cruz students uncover security bug that could let millions do their laundry for free

TechCrunch Disrupt 2024 is just around the corner, and the buzz is palpable. But what if we told you there’s a chance for you to not just attend, but also…

Harness the TechCrunch Effect: Host a Side Event at Disrupt 2024

Decks are all about telling a compelling story and Goodcarbon does a good job on that front. But there’s important information missing too.

Pitch Deck Teardown: Goodcarbon’s $5.5M seed deck

Slack is making it difficult for its customers if they want the company to stop using its data for model training.

Slack under attack over sneaky AI training policy

A Texas-based company that provides health insurance and benefit plans disclosed a data breach affecting almost 2.5 million people, some of whom had their Social Security number stolen. WebTPA said…

Healthcare company WebTPA discloses breach affecting 2.5 million people

Featured Article

Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Microsoft won’t be facing antitrust scrutiny in the U.K. over its recent investment into French AI startup Mistral AI.

2 days ago
Microsoft dodges UK antitrust scrutiny over its Mistral AI stake

Ember has partnered with HSBC in the U.K. so that the bank’s business customers can access Ember’s services from their online accounts.

Embedded finance is still trendy as accounting automation startup Ember partners with HSBC UK

Kudos uses AI to figure out consumer spending habits so it can then provide more personalized financial advice, like maximizing rewards and utilizing credit effectively.

Kudos lands $10M for an AI smart wallet that picks the best credit card for purchases

The EU’s warning comes after Microsoft failed to respond to a legally binding request for information that focused on its generative AI tools.

EU warns Microsoft it could be fined billions over missing GenAI risk info

The prospects for troubled banking-as-a-service startup Synapse have gone from bad to worse this week after a United States Trustee filed an emergency motion on Wednesday.  The trustee is asking…

A US Trustee wants troubled fintech Synapse to be liquidated via Chapter 7 bankruptcy, cites ‘gross mismanagement’

U.K.-based Seraphim Space is spinning up its 13th accelerator program, with nine participating companies working on a range of tech from propulsion to in-space manufacturing and space situational awareness. The…

Seraphim’s latest space accelerator welcomes nine companies

OpenAI has reached a deal with Reddit to use the social news site’s data for training AI models. In a blog post on OpenAI’s press relations site, the company said…

OpenAI inks deal to train AI on Reddit data

X users will now be able to discover posts from new Communities that are trending directly from an Explore tab within the section.

X pushes more users to Communities