Nuance Stock drops to a 52 week low

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When a number of Executives at your own company start selling off the shares they own in the company they work for you have a problem. The domino effect happens when the Market takes notice and also begins to sell their shares of the same stock.

Nuance, we have a problem!

That is what has recently happened at Nuance. If the Executives running the company don't have confidence in their company's stock, who else will. No one! I have long taught my daughters to judge potential boyfriends by their actions more than by their words. Because people "say" a lot of things. But talk is cheap! What a person does in their own self interest will give you a much clearer indication of what they believe. It would appear that a number of Nuance Executives have a confidence problem in the future of Nuance stock.

Nuance does have a number of great products! They have also have acquired an impressive portfolio of companies that are closely aligned with the copier industry (eCopy, Equitrac, Copitrak). And of course Nuance has their flagship product "Dragon Naturally Speaking". When Nuance first acquired eCopy I had dinner with a number of their Senior VPs, VPs, and Directors at The Capitol Grille, near their Head Quarters in Burlington, Ma. If I remember correctly they said that they owned 98% of speech recognition market place. I may be slightly off on the percentage but it was nearly all of it. I remember one of them saying when you talk to your car or phone, that's our technology. That is one reason why it is rumored that Apple may be interested in buying Nuance, for their voice recognition technology. The lower stock price will certainly make them more attractive for a takeover bid.

But what would Apple do with eCopy, eQuitrac, and Copitrak? These are all great products with a nice market share in their respective spaces. Nuance's problem is NOT their products, it is their support! The reason is Nuance is designed to sell their products (Dragon, PDF Convertor) to the Consumer market, and they are good at that. What Nuance has seriously struggled with is selling products through a Dealer Network that requires significant service & support for installation and after the sale. They have a drop ship consumer mentality even with their Dealers. They treat their Dealers the same as the Consumer \ End User. Their Dealers resent this!

Their has been some talk about splitting off these products and either running it as a separate division or selling it off separately. I like that idea, but only if they have "copier guys" who understand how to sell through a dealer network run this new division. That means much better service & support for installation, and after the sale. It also means listening and being responsive to your dealers when they identify problems with your product. Because when the vendors stop being responsive to their dealers, their dealers punish them by not selling, or at least not "leading" with their products.

I want to take a minute to define what I mean by "leading with a product". A pre sales solutions analyst has dozens of "solutions" that s/he can offer to solve their customer's issue. But you end up with a product that you favor, that you are comfortable with (because it works well and has good support), so it becomes the "go to" product that you lead with. That doesn't mean that it is a one size fits all solution. You still have other options when your "lead" product is not a good fit. But they become more of the exception because your "lead" product works better in most situation. I have no predisposed reason to like one product over another. I like what works well and helps me sell my MFDs. There was a time when eCopy, especially Sharescan was my lead product. We pushed it, we demo'd it, we trained our sales people on how to sell it. With a catalog of over 250 connectors, and terrific support we loved it. But that was many years ago. Today, if I sell eCopy to an important customer that has been using it, and wants to keep using it, I often will buy it from a third party (Cranel Imaging) that sells it to me at the same price but they add a layer of support that is missing from Nuance.

I am not saying that Nuance is for sale. I am sure that there will be a lot of spin control announcements coming out of Nuance this week. You may even see some of these Nuance Executives resign or get fired. Truthfully, If you no longer believe in the company that you work for, to the end that you sell off all or most of your stock, I am not sure you should have a leadership position in that company. Because your public actions have hurt the company that employs you.

My dream deal for Nuance

If I was putting together the deal, I would split off and sell the Consumer products, like Dragon & PDF Convertor to Apple. Then I would sell the Copier products (eCopy, eQuitrac, and Copitrak) either directly to Cranel or to a Company that could buy both Cranel & the Nuance Copier products.

That would best position these products to be successful. You would still need to put together a Dealer Support network, but there are enough people out there who have worked for Copier Manufacturers (Like Canon, Ricoh, and Konica Minolta) that you could find the right people to interact with the dealers for sales & support.

Nuance may claim to have these two separate divisions now, but they are both run by the Consumer Market people. They have a drop ship mentality. This is the same mentality that has kept HP from dominating or even being significantly relevant in the MFD market. It would not even help Nuance if they bought Cranel Imaging, unless they would allow the Cranel Team to REALLY manage their Copier Products Division. But that would take some humility, and a recognition that they aren't doing a good job with these products. Who knows, maybe a 52 week low in your stock price and a number of your top executives dumping their company stock could generate the needed humility to accomplish the change. Maybe.

That's My $0.02,
Vince McHugh

Updated 12-31-2013 at 08:01 AM by Editor

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