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Carl Icahn buys a stake in Mass. tech firm Nuance

Mass. tech firm may face fight for control

Billionaire investor Carl Icahn has developed a reputation for buying significant holdings in underperforming companies and then pushing for major changes.SCOTT EELLS/BLOOMBERG/FILE 2012

Carl Icahn is back in Massachusetts, and this time he may face his biggest brawl yet over a Bay State company.

Icahn, a billionaire investor who pressures underperforming companies to make massive changes, disclosed Monday that he has accumulated 9.3 percent of Nuance Communications Inc., maker of the speech technology behind Dragon software and Siri on the Apple iPhone, whose stock recently fell nearly 20 percent.

The big stockholding sets the stage for what could be a messy battle for control of the Burlington-based Nuance, pitting a veteran of some of Wall Street's most bruising takeover battles against a combative chief executive who built Nuance into a technology powerhouse while bruising more than a few egos along the way as well.


Chief executive Paul Ricci made Nuance the dominant name in speech technology through a dizzying string of acquisitions, many of them just fledgling competitors, and cemented business connections with industry giants Apple Inc. and Samsung, while also making inroads into the lucrative health-care marketplace.

Widely followed industry analyst Walt Tetschner described Ricci as a "hard-nosed manager," while critics said Ricci used threats and expensive litigation to wear down competitors.

But now with Icahn on the scene, investment analyst John Bright had this to say for Ricci and Nuance: "Generally speaking, you don't want to pick fights with bullies."

Famed — and feared — for his takeover of airline TWA and his unsuccessful run at US Steel, Icahn has also wrought huge changes at two of Massachusetts' largest companies.

He undertook a prolonged battle for control of Biogen Idec Inc. that eventually resulted in the pharmaceutical firm replacing its chief executive and undergoing a restructuring, and he was also among a group of investors that pressured another drug firm, Genzyme Corp., to sell itself in 2010 for $20.1 billion to French pharmaceutical giant Sanofi SA.


In a regulatory filing Monday, Icahn did not disclose his intentions for Nuance and his company declined to comment. Nuance officials, meanwhile, declined to directly address Icahn's interest in the firm.

"Nuance will treat Mr. Icahn and his firm with the same respect and accord as we would any other investor that is supportive of our business," said spokesman Richard Mack.

Icahn remains a great force in corporate America. He recently entered the multibillion-dollar buyout battle for computer maker Dell Inc. as a rival to a group led by founder Michael Dell.

He is also involved in one of Wall Street juiciest battles, backing nutritional products maker Herbalife against a New York hedge fund manager.

In other cases, his investments in companies are lower-key. He owns 10 percent of video streaming company Netflix Inc., but so far hasn't pressed publicly for major changes.

After his stake in Nuance was disclosed, the company's shares jumped 5.70 percent Tuesday to close at $21.33. That would value the overall company at $6.75 billion, with Icahn's share at $625 million.

But prior to Icahn's arrival, Nuance had been wobbling. In February, after reporting lower-than-expected earnings and cutting its business forecast for the near term, Nuance's stock took a one-day hammering, falling 19 percent.

But while Ricci has overseen a strategy to buy up the competition and acquire some of the leading talent in the speech recognition field, Tetschner said the company has become bloated and unfocused.

Maybe Icahn "can take a whack at straightening it out," the analyst said.


In years past, Ricci triggered some intense infighting with competitors, most notably rival Vlingo Corp. of Cambridge.

The two were competing to become the dominant provider of speech recognition technology on smartphones, with multiple lawsuits and a public animus not normally associated with patent disputes.

After years of litigation, Vlingo eventually agreed to be acquired by Nuance for $200 million in 2012.

Michael B. Farrell can be reached at michael.farrell