Shares of Nuance Communications Inc jumped to their highest in more than 15 years after an influential technology blog said Apple Inc might expand its licensing deal with the speech-recognition technology provider.
On May 6, TechCrunch said Apple had been negotiating a deal with Nuance in recent months, citing unnamed sources.
Apple, which acquired app developer Siri last year, needs Nuance's technology to power Siri's virtual personal assistant that responds to voice commands and is available for free on Apple's iPhone and iPod touch.
A possible expansion of the licensing agreement could make speech more prolific, Wedbush Securities analyst Scott Sutherland said.
Voice recognition is expected to be a major feature in the next version of Apple's operating system -- iOS5.
Sutherland said Apple may add a single-touch button to its speech interface for the iPhone 5 and the new agreement could increase revenue for Nuance by 25 cents per phone.
Nuance can get $15-$20 million incremental high-margin revenue per year through the Apple relationship, Sutherland said.
It (Nuance) has been losing out market share to companies like Samsung Electronics Co Ltd. If they attach themselves to the Apple cart ... that's not such a bad idea at all.
Last November, Apple co-founder Steve Wozniak said the company had bought Nuance, pushing the stock up, but later retracted his statement.
Sutherland said while Apple might be interested in one of Nuance's business units, but a takeout offer seemed unlikely as the stock was expensive.
The stock trades at 23 times free cash flow, according to StarMine data.
Also, Nuance sells its products to other handset vendors -- a big part of its allure -- and an acquisition by Apple might put an end to those revenue streams.
Shares of Burlington, Massachusetts-based Nuance, which jumped 14 percent to $22.93 at opening, were up 8 percent at $21.72 in midday trade on Nasdaq.
More than 8 million shares had changed hands by 1305 ET -- almost five times normal volume.
(Reporting by Sayantani Ghosh in Bangalore; Editing by Sriraj Kalluvila)