Carl Icahn Increases Nuance Stake, May Seek Board Seat

Billionaire investor Carl Icahn boosted his stake in Nuance Communications Inc. (NUAN) and may seek to put a representative on the board of the speech-recognition software maker.

Funds controlled by Icahn, including Icahn Partners LP and Icahn Onshore LP, reported a combined 16.9 percent stake in Nuance, up from 16.4 percent, according to a filing with the U.S. Securities and Exchange Commission yesterday.

Icahn uses holdings to seek change in companies he deems undervalued or ill-managed. When Icahn fist took a stake in Nuance, the investment was seen as a move to push the company to sell itself or shed some businesses. Nuance Chief Executive Officer Paul Ricci is seeking to revive growth as the Burlington, Massachusetts-based company expands in voice-recognition tools that can be used over the Web and on mobile devices.

The Federal Trade Commission also granted Icahn approval of a Nuance-related transaction yesterday without providing further details. Nuance adopted a stockholder rights plan, which went into effect yesterday, designed to reduce the likelihood that a shareholder can gain control of the company by buying up shares on the open market.

If he gets a board seat, Icahn could push Nuance to sell some of its businesses, or the entire company. Potential suitors for Nuance could include Microsoft Corp. (MSFT), International Business Machines Corp. or Oracle Corp. (ORCL), according to Shyam Patil, an analyst at Wedbush Securities Inc. It’s also possible that Apple Inc. or Google Inc. (GOOG) would be interested in Nuance’s mobile technology, he said on Aug. 8.

Profit Outlook

Shares in Nuance rose 2.1 percent to $18.69 at 11:33 a.m. in New York, after reaching $19 for the biggest intraday gain since May 21. The stock had declined 18 percent this year through yesterday.

Nuance plunged the most in more than six years on Feb. 8 after cutting full-year sales and profit forecasts, citing shifting demand for software. The company said at the time that transcription volume was falling as health-industry customers switched to electronic medical records and its new Dragon Medical speech-to-text software.

“We remain committed to maintaining greater price discipline and to driving towards a focus on recurring revenues,” Ricci said on an Aug. 6 conference call with investors. “For these reasons, and being mindful of recent execution issues, we’ve taken a guarded approach” to guidance.

Carl Icahn didn’t respond to a request for comment. Richard Mack, a spokesman for Nuance, said the company “welcomes communications with stockholders and values input toward the goal of enhancing stockholder value.”

To contact the reporters on this story: Olga Kharif in Portland at okharif@bloomberg.net; Jeremy R. Cooke in Boston at jcooke8@bloomberg.net

To contact the editor responsible for this story: Pui-Wing Tam at ptam13@bloomberg.net

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