Nuance Communications Inc. (NUAN), the maker of speech-recognition software, rose the most in more than five years after reports the company is considering a sale and has talked to potential buyers including Samsung Electronics Co.
Nuance has recently spoken about a possible sale with Samsung and private-equity firms, the Wall Street Journal reported, citing unnamed people familiar with the matter. Nuance, which counts billionaire Carl Icahn as its largest shareholder, rose 9.7 percent to $18.76 at the close in New York, the biggest one-day increase since January 2009.
Richard Mack, a spokesman for Nuance, declined to comment on the report. Jini Park, a spokeswoman for Samsung, declined to comment today. Samsung fell 0.7 percent to 1,365,000 won at 11:12 a.m. in Seoul.
Nuance, which has a market value of almost $6 billion, has been under pressure from activist shareholder Icahn, who took a stake in the company in April 2013 and has built up his shares. As of March 31, funds controlled by Icahn had a combined 19 percent stake in Nuance, according to data compiled by Bloomberg.
“A sale is very possible when an asset is undervalued,” John Bright, an analyst with Avondale Partners in Nashville, Tennessee, said in an interview. “It’s undervalued given not only their competitive position within the speech-as-an-interface market, but also for traditional metrics -- cash flow and enterprise value.”
Even after yesterday’s stock gain, Nuance is trading at about 17 times its cash flow over the past four quarters, cheaper than about 60 percent of U.S. application software companies with market values higher than $1 billion, according to data compiled by Bloomberg.
Bright said a sale of Nuance would probably fetch $25 to $30 a share. He has the equivalent of a buy rating on the stock.
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 company has reported a net loss for six straight quarters, and the stock had fallen 16 percent in the last two years as of last week.
The company last month projected revenue for the third quarter of $488 million to $508 million, below analysts’ estimates at the time for $527.5 million.
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