In a move which will expand its presence in the mobile industry, speech technologies leader Nuance (News - Alert) Communications Inc. has reportedly acquired Tegic Communications Inc., a wholly owned subsidiary of AOL which develops embedded software for mobile devices.

The deal, which is valued at about $265 million, will give Nuance access to Tegic’s T9 predictive text input software, which has reportedly been shipped to more than 2.5 billion devices. Nuance will now begin to integrate Tegic’s next-generation integrated text and touch input solutions into its portfolio of voice-enabled applications for device control, mobile search, email and text messaging.

AOL (News - Alert) bought Tegic in December 1999 so that it could use its predictive text software as a way to simplify and promote instant messaging from mobile phones. Tegic’s T9 interface simplifies the typing of text messages on mobile phones by using predictive text technology. For example, rather than pressing “9-9-6-6-6-8-8” to spell the word “you” on your phone’s keypad, you can press “9-6-8” and the software will “predict” which word you are trying to spell.

AOL says it is selling the subsidiary so it can focus on its core business.

“AOL’s sale of Tegic marks yet another step in our overall strategy of focusing on our core assets to drive profitable growth for our shareholders,” said Time Warner Inc. Chairman and CEO Dick Parsons (News - Alert) in a statement. “As AOL continues to make impressive progress, it’s more important than ever that AOL’s resources are fully aligned behind growing its worldwide advertising businesses.”

AOL Chairman and CEO Randy Falco said Tegic is “a good match” for Nuance, and added that the sale “lets us focus our mobile business on building strong consumer-based, ad-supported mobile experiences.”

The two companies, which have been partners since 2005, will continue to meet the needs of their customers and partners, which include Nokia, Samsung, Sony Ericsson (News - Alert), LG and Motorola.

Nuance reportedly plans to integrate Tegic’s software with its Nuance Voice Control software, obtained through the acquisition of MobileVoiceControl Inc. in January. The voice control interface is intended to simplify text input and menu navigation, and is available for smartphones and PDAs running operating systems from Microsoft (News - Alert) Corp., Palm Inc. and Research In Motion Ltd. By combination of the solutions sets the stage for a new mobile user interface which combines voice, text and touch, thus radically changing the mobile experience for consumers and mobile workers. Nuance reports that this new multimodal interface will be available to all manufacturers across their product lines.

“The enhanced capabilities of mobile devices and networks have fueled significant innovation in features and services, but their potential has been tempered by the traditional interface on most mobile devices,” said Paul Ricci, chairman and CEO of Nuance, in a press release. “Tegic shares our vision of delivering an integrated, superior and flexible user experience for today’s wireless subscribers. Together, we are poised to redefine the way people interact with their mobile devices, delivering a more convenient, simple way for consumers to control features and access information on their phones, and search and navigate the mobile Web.”

Nuance expects Tegic to contribute between $65 million and $68 million in non-GAAP revenue and $45 million and $48 million in GAAP revenue in 2008. It predicts a GAAP loss between $0.12 and $0.13 per share; and non-GAAP earnings between $0.04 and $0.05 per diluted share. The deal is expected to generate approximately $8 million to $10 million in cost synergies in the upcoming fiscal year.

The transaction, which is subject to customary closing conditions and regulatory approvals, is expected to close in Nuance's fiscal fourth quarter.

For more information, visit www.nuance.com and www.tegic.com.

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Patrick Barnard is Associate Editor for Customer Interaction Solutions magazine and Assignment Editor for TMCnet. To see more of his articles, please visit Patrick Barnard’s columnist page.

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