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Anybody following previous articles on Nuance Communications, Inc. (NASDAQ:NUAN) knows that the company and stock have been incredibly appealing, yet the scenario never existed to load up on the stock. The company has had a decent growth profile and it has compelling technology, yet the combination hasn't lead to stock returns over the last 18 months due an over reliance on mergers and the accumulation of debt.

The company is a leading provider of voice and language solutions for businesses and consumers around the world. Its technologies, applications, and services make the user experience more compelling by transforming the way people interact with devices and systems.

Nuance is famous for being the technology behind the Siri product used by Apple (NASDAQ:AAPL), which recently hit 52-week lows. Ironically within the same day reports of two potential catalysts hit the wires that could push the stock higher.

One catalyst is technology driven by the company and another is in the form of an outside agitator that has purchased a considerable stake in the stock. Will either be enough to get this technology leader back into the mode of benefiting the shareholder via stock gains?

Major Agitator Carl Icahn Arrives

After the close on Monday, it was revealed that billionaire Carl Icahn bought a 9.3% stake in the company. Icahn is famous for agitating management into making changes that theoretically benefit shareholders. He has been successful lately with major stakes with Netflix (NASDAQ:NFLX) and Herbalife (NYSE:HLF). Investors following Icahn into those positions could have made decent returns. Others, such as the investment in Chesapeake (NYSE:CHK) only worked if an investor exited the position at the same time and others such as Navistar (NYSE:NAV) have struggled.

The only concern is that the filing shows that Icahn has only taken a passive stake indicating that he isn't pushing for change. While Icahn clearly has derived that the stock has value without change, the current management team hasn't been able to achieve gains for shareholders. Has Carl been successful in passive investments and will he actually stay passive?

Launch Of Voice Ads

Prior to the open on Monday, Nuance announced the launch of the Voice Ad product for mobile phones. This product promises to use the voice-activated technology of Nuance to create incredible interactive mobile ads. The company hopes that speaking to an ad will create a lasting impression for the brand as opposed to the mostly ignored display ads. Will voice ads be the compelling reason brands move to mobile from large screened PCs and TV experiences? Imagine the day when consumers can interact with the ad to find the nearest location that sells the item or maybe a coupon to spur the purchase decision.

The company already has creative advertising agencies on board and is working with leading independent mobile ad networks such as Millennial Media (NYSE:MM), Jumptap, and Opera Mediaworks. With the agencies and mobile ad networks in place, voice ads could be a hit by the holidays.

Check out the video on AllThingsD with Mike McSherry showing off a prototype of the technology. Obviously the ad is a rough example of what can be done, but imagine the level of creativity that can be built into the ads as the market gets a hold of this technology.

According to Forbes, Nuance will take in an estimated 1-2% share of revenue from the ad networks that use the technology in their ads. The costs of voice-recognition ads will tend to cost companies slightly higher than the normal $10 per thousand views for rich media.

Was Guidance That Horrible?

Even after the 5.7% jump Tuesday on the Icahn news, the stock trades at less than 11x forward earnings. At a market cap of $6.75B, Icahn could do limited agitating and obtain a higher valuation for this stock.

While most investors get caught up in the momentum buzz of the earnings season, the ultimate valuation is based on the earnings potential of a stock and not the momentum. The company still forecast 24% revenue growth for both Q2 and fiscal year 2013. Not bad for a stock trading at only 11x forward earnings.

The company has a lot of technological expenses that should work out to a rebound in earnings growth in fiscal 2014. And this issue could be where Icahn works the best. He is famously working on turning Chesapeake Energy into a cost-cutting machine now that the CEO has been forced out.

While Nuance in the short-term is facing the software trend towards usage-based pricing that elongates the revenue cycle, the company continues to 'splurge' on deals that hint at the company being unable to control spending and focus on the existing products. Icahn's presence might help cut back on those deals that have left a very cash flow positive company with a lot of debt.

Stock Performance

The stock performance over the last 18 months has been dismal. The stock peaked at around $31 in early February last year and eventually traded down to $18. The recent gains from the Icahn purchases only got the stock over $21. It is still substantially below the highs as the S&P 500 hits all-time highs.

The below chart highlights the lack of returns from Nuance along with the major mobile ad network working with voice ads:

^SPXTR Chart

^SPXTR data by YCharts

Millennial Media is another favorite stock that could benefit greatly from this technology. The interesting news is the lack of Apple amongst the news. Apple runs the 3rd largest mobile ad network. Google (NASDAQ:GOOG) has the largest mobile ad network, but it is busy trying to create its own voice-recognition software so the exclusion isn't surprising. All providing a greater example of why an independent network such as Millennial as an advantage.

Conclusion

The Voice Ads product increases the already attractive technology position of Nuance. Whether the current management team can turn that into shareholder wealth is another issue. The recent addition of Carl Icahn could help turn the stock around as he hopefully agitates for shareholder returns.

The stock is very attractive at $21, but investors need to understand that past positions of Icahn haven't gone straight up. Investors waiting for a slight pullback to $20 will be more aligned with the great investor that clearly bought below $20.

While voice ads could be a huge catalyst to income, Icahn might be a bigger catalyst to stock gains.

Source: 2 Major Catalysts For Nuance: Carl Icahn And Voice Ads

Additional disclosure: The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion or consult a financial advisor. Investing includes risks, including loss of principal.