Investors should be cautious about Nuance Communications Inc. (NASDAQ:NUAN), Herb Greenberg said in a recent discussion on CNBC.
The comment from Greenberg comes after a report from The Wall Street Journal that revealed that Samsung may be in talks with Nuance Communications Inc. (NASDAQ:NUAN) for a possible acquisition.
According to Greenberg, he is keeping his “yellow flag” on the voice and language technology company because buying its stock at the moment is a risk call and not a trading call. The stock has climbed since the report that Samsung is interested in buying the company.
The CNBC contributor said that while the uptick in the stock price is because of the deal, the company’s performance is worrying. He noted that without the deal, one could argue that the performance of Nuance Communications Inc. (NASDAQ:NUAN) which he said has been “substandard” as of late, will continue to disappoint.
He noted, however, that private equity makes sense for the company at the moment. He added that notorious activist investor Carl Icahn got into the company in April of last year and has increased his position in the company since then. Greenberg also echoed comments made by industry observers that Apple Inc. (NASDAQ:AAPL) and Samsung would possibly make a play in the company in the interest of wounding each other. Nuance supplies voice recognition technology to Apple and Samsung while Google Inc (NASDAQ:GOOGL) and Microsoft Corporation (NASDAQ:MSFT) have their own voice recognition technology, Greenberg added.
However, Greenberg noted that even with that said, without a deal, people would be back to the same old Nuance Communications Inc. (NASDAQ:NUAN) which has had negative organic growth in five straight quarters.
Asked whether a huge new product cycle will change his view on the company, Greenberg said no because manufacturers which the company supplies will always try to keep costs down. Furthermore, he said that a possible deal to acquire the company would be a complicated one – something that a potential buyer will still have to analyze and be comfortable with.
Investors in Nuance Communications Inc. (NASDAQ:NUAN) includes Carl Icahn’s Icahn Capital Lp which reported a 60.78-share position in the company by the end of March. That stake was valued at about $1.04 billion. Another investor is Healthcor Management Lp managed by Arthur B Cohen and Joseph Healey which reported 1.45 million shares in the company by the end of the first quarter of 2014.