NEW YORK (TheStreet) -- Nuance (NUAN) is not a commonly followed stock compared to the titans of tech. Yet, at a $6 billion market cap, it's hardly a micro-cap.
Most people who know the company know that it's the leader in voice control systems that power such apps as Apple's (AAPL).
It's a textbook industry roll-up.
When I once worked in the voice industry -- which brought us Flipboard founder and former Twitter director Mike McCue as well as new Xiaomi executive Hugo Barra -- the two big titans of voice apps were Nuance and SpeechWorks. Both had splashy dot-com era IPOs and then struggled to keep revenue growing through the desert years of 2001 to 2003. Suddenly -- and seemingly out of nowhere -- both of these companies and scores of smaller private ones were bought up by a company no one in the industry had ever really heard of: ScanSoft. ScanSoft was led by a guy no one had ever heard of: Paul Ricci. Ricci's first big acquisition was buying the Lernout & Hauspie assets out of bankruptcy in 2001. Two years later, he bought SpeechWorks, which was also in the Boston area. Two years after that, he "merged" with Nuance and -- smartly -- took its name. Ricci, now 57, is known for being tough as nails and a guy with no real strategy except just buy revenue and cut out costs. If you're looking for a coherent corporate strategy, keep looking. As a result, Nuance is now a multi-headed corporate beast with a health care transcription business, an enterprise one and a mobile business sold to carriers, Samsung and Apple. It shouldn't be. It should be broken up into three separate businesses so investors can place their own value on each business. But Ricci won't split the baby -- and that's why someone else must. It's time for Ricci to go. He paid himself $37 million last year, even though Nuance shares have declined 23% in value in the last 12 months.
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This year, while the Nasdaq is up 26%, Nuance shares have dropped more than 13%.
There have been repeated missteps in terms of Nuance execution leading to several disappointing earnings calls.
All the while, while Siri and other services have been increasing in popularity, Ricci has yet to really articulate a strategy for Nuance.
Enough is enough. Paul Ricci, you've had your chance to do your strategy of rolling up the industry. There are now no more companies to buy. You've had your chance to overpay yourself. Now it's time for you to go. It's time for Carl Icahn to step up to the plate and press his case for why he should be on the Nuance board and why Ricci should step down. With Icahn allowed to bring in his own choice for the next CEO, Nuance shareholders would have their best chance to see a meaningfully increase in the value of their shares in a year where the rest of the Nasdaq stocks are running away with giddiness. The market has clearly spoken with its verdict on Paul Ricci's capabilities as leader of Nuance. It hads said it's time for him to move on to the next chapter of his life. At the time of publication the author was long NUAN and AAPL. Follow @ericjackson This article was written by an independent contributor, separate from TheStreet's regular news coverage.
Eric Jackson is founder and Managing Member of Ironfire Capital and the general partner and investment manager of Ironfire Capital US Fund LP and Ironfire Capital International Fund, Ltd. In January 2007, Jackson started the world's first Internet-based campaign to increase shareholder value at Yahoo!, leading to a change in CEOs in 2007. He also spoke out in favor of Yahoo!'s accepting Microsoft's buyout offer in 2008. Global Proxy Watch named Jackson as one of its 10 "Stars" who positively influenced international corporate governance and shareowner value in 2007. Prior to founding Ironfire Capital, Jackson was President and CEO of Jackson Leadership Systems, Inc., a leadership, strategy, and governance consulting firm. He completed his Ph.D. in the Management Department at the Columbia University Graduate School of Business in New York, with a specialization in Strategic Management and Corporate Governance, and holds a B.A. from McGill University. He was previously Vice President of Strategy and Business Development at VoiceGenie Technologies, a software firm now owned by Alcatel-Lucent. In 2004, Jackson founded the Young Patrons' Circle at the Royal Ontario Museum in Toronto, which is now the second-largest social and philanthropic group of its kind in North America, raising $500,000 annually for the museum. You can follow Jackson on Twitter at www.twitter.com/ericjackson or @ericjackson. You can contact Eric by emailing him at Dr.eric.jackson@me.com.
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