For many followers of the speech industry, this was a scenario that was envisioned years ago as a way to further establish the speech technology industry, namely a merger between giants (and arch-rivals) SpeechWorks and Nuance. 

Well, that was no longer possible after ScanSoft bought SpeechWorks back in 2003.  At that point, ScanSoft was a MA-based imaging company that started up gobbling up speech companies such as L&H and Philips Speech Processing.  But why an imaging company with expertise in technologies such as OCR (Optical Character Recognition) would want to delve into speech in the first place?  Because many of the algorithms used in OCR have some commonality with those used in speech processing (e.g. recognition). Similar discrete-event simulation and Markov chain models can be used in both cases.

Fast forward to 2005, and the news today was that ScanSoft was about to acquire Nuance for $221 million in a stock and cash deal.  And hence, a speech giant was born, having a full portfolio consisting of engines in speech recognition, text-to-speech and speaker verification.  In the ASR (automatic speech recognition) market alone, the new entity will have a 75 percent share of the market.  Will regulators allow this transaction to go through?  Probably so, due to the increased traction of other vendors such as IBM and Microsoft.  But the integration of these two companies will be a challenge, as they compete in many product lines, so there is a lot of duplication.

In the meantime, another interesting thread on this story is that private equity company Warburg Pincus will buy $75 million in ScanSoft common stock in order to help finance the merger.  Warburg Pincus is the same company that has invested in companies such as Avaya, BEA Systems, Proxim, SS8, and Veritas Software, among others.  The company obviously believes in the potential of the speech industry, particularly with the proliferation of shrink-wrap or built-in small vocabulary speech engines in mobile devices.