Nuance adds to a shrinking business

Contact: Brenon Daly

The latest acquisition by serial shopper Nuance Communications is a bit of a blast from the past. On Monday, Nuance said it will hand over $54m in equity for eCopy in a move that bolsters its imaging business unit. (Revolution Partners banked eCopy while Needham & Co advised Nuance, as it did in the company’s purchase of SNAPin Software a year ago.) The pickup of eCopy, however, snaps a string of deals that Nuance has used to build out its mobile and healthcare business lines.

If you didn’t realize that Nuance had an imagining unit, you could be forgiven. Although the company has its roots in that technology, it has largely left that market behind. (The current Nuance is actually the product of a mid-2005 marriage of Nuance Communications and ScanSoft, the name of which should give you some idea of its business.) In fact, through the first three quarters of the current fiscal year, the imaging unit represents just 7% of Nuance’s total revenue.

And that slice is only getting smaller. So far this fiscal year, sales in the imaging unit shrank a staggering 20%, while the vendor’s other two divisions (mobile and healthcare) both grew and overall revenue rose 12%. Since the imaging business appears to be little more than an afterthought inside Nuance, we’re surprised to see the company double down on the unit with the eCopy acquisition. That’s actually a reversal of the direction of deal flow at the division that we would have suspected. We could certainly see a situation where Nuance divests its imaging business, ditching its past and focusing on mobile and healthcare for future growth.