Nuance Communications NUAN

While I am not recommending this stock, I think it is a very interesting story I should bring to your attention. Nuance Communication is a Voice Recognition Software company. This is a small cap growth story with accelerating revenue growth and a top of the line product.
I know what you think, voice recognition is one of those mirage technologies as soon as we think we have it in our grasp we end up with...software that doesn't work. (ie: this video of how Microsoft made it "work")

But Dragon Naturally Speaking 9 is the real deal, not only it would understand even my French accent, but it will also help you navigate through your windows applications. Microsoft and Ford signed contracts with Nuance this year to provide them with their voice recognition software.
This isn't the only product Nuance is the proud owner of, they also provide IP voice dialer solutions for employee to employee communications, a very useful tool in the Health Care and Education industries, also voice recognition solutions for Sprint customers enabling the full potential of their mobile devices. The usage rates doubled during the last 9 months of 06.

Why is that important? Because Nuance’s highest margins are done on maintenance fees charged to these companies.

I’ve checked out the financial and I like the equity building, the cash flow, and it seems they have their debt under control. The obvious bother in all of this is that they have yet to produce any GAAP income, also the non-GAP came in 3 cents per share higher than analyst’s estimates last quarter.

Of course after a 20% jump last week, and the way the stock handled itself the last time the company had disappointing earnings (-50% in one month), at these levels I might add, you might want to take some money off the table.

Overall the future looks bright for Nuance, if not acquired pretty soon, it looks like a winner for many years to come.