Nuance announced that they have acquired BeVocal and the big rumor is that Tellme is close to an acquisition deal – possibly Microsoft. While Tellme is publicly denying the Microsoft acquisition, I know a number of insiders who have exited the company recently.
Both the Nuance/BeVocal and TellMe/Microsoft acquisitions aren’t particularly that wonderful overall in my opinion – reinforcing my earlier post 2 months ago about the general speech industry.
The BeVocal acquisition is interesting. It has raised $85M from venture capital giants such as Mayfield since it started in 1999. A $140M price tag on an $85M raise with a company that generates $20M isn’t exactly a home run for a tier one VC, but it’s better than a sharp stick in the eye.
If the rumors are accurate, however, Tellme is generating $100M in revenue and a $200M price tag on a $250M VC raise would not be too wonderful. My biggest question: is the $100M not sustainable? They claimed in the past profitability on those number. Maybe their costs are exploding or the massive acquisition of SBC, AT&T, Bellsouth, Cingular and the rest of the U.S. telco is imploding those revenue deals that they had with AT&T.
But my bigger question about Tellme is “why Microsoft?”
Why not Google? Google and Tellme seems to make a lot more sense. Maybe Google can’t figure out what they want to be in the voice space and Tellme is too pricey. But a Google/Tellme fit seems to make much more sense in all levels. Both companies are in the valley. Tellme has a number of large carrier and Enterprise relationships. Tellme is more of a unix (or Intel Solaris to be specific) technology shop and looks and feels much more like a Google company than a Redmond company. Microsoft isn’t exactly killing it with their Voice strategy. Microsoft is definitely starting to see the light on software-as-a-service… but their voice and speech attempts have not been wonderful.
The ultimate winner in this entire story just might be Voxeo. Voxeo seems to be growing rapidly in the past couple of years and they have an advantage by having both software and software-as-service with their hosting capabilities. While both Tellme and BeVocal both had their own platforms, Voxeo has been able to successfully add an on-premise channel to their offering and find additional revenue streams and customers who want either on-prem, hosted or both (like in a network fail-over situation). Voxeo has also been able to retain profitability, growth and successfully service the mid-market. Johnathon Taylor, Voxeo’s CEO, once told me: “I hate carriers. We don’t want to work with carriers,” and this just might have saved his business. Voxeo founders were also able to buy back their company from the VCs are they had invested $60M during the dot com hayday (same timeframe as BeVocal and TellMe). While the big boys have duked it out while the carriers have consolidated into the gang of 3 – Voxeo has been steadily rolling up the mid-market and smiling while they do it. Even with the latest Prophecy platform, they’ve included both ASR, TTS, VoiceXML and CCXML all in one nice and neat package — and it’s good enough for most applications.
The loser in this activity? Well, Nuance clearly stands to both win and lose. Nuance clearly needs to acquire companies to grow their revenue base given that speech revenues probably aren’t long-lasting – they’re doing so at the danger of continuing to cannibalize their base and eat their partners. While they’ve been doing this all along – it continues to be more explicit with each turn. I’m also sure that the Nuance / BeVocal acquisition is both an opportunity and also a direct hit against Tellme – given that Nuance sued them last year. If Microsoft acquires Tellme, that will be one more competitive notch against Nuance as Microsoft continues to try and increase their positioning as a leader in VoiceXML and ASR/TTS. But, who knows if that will really ever materialize into anything more than a half-hearted attempt by Redmond. I think Vista and Office are much more in trouble in the macro picture for Microsoft.
technorati tags: tellme, bevocal, nuance, google, microsoft, voxeo
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