Growth and funding for a speech recognition software developer
Our client had developed a strong suite of applications for the emerging speech recognition market. For example, one application responded to speech cues such as asking for driving directions to a particular site and then delivered the appropriate content to the user, typically over a wireless phone. With this suite, the client had an industry-leading set of speech application solutions. However, their core customers (wireless and wireline carriers) had been slow to roll out speech application services to their embedded customer bases, and as a result our client faced stagnating sales and a funding crunch.
Our focus was to identify growth strategies for the business as well as to evaluate the overall strategic options for the business, including potential merger or acquisition. We needed to define the overall industry value chain, from the core ASR (automated speech recognition) engine which our client's applications were built on to the speech platform and applications and finally the system integrator elements of the value chain. We also wanted to identify key competitive threats to our client's competitive positioning.
Our initial approach was to conduct research on the value chain and see if there were any clear competitors or threats. We found a number of examples as their speech applications utilized a markup language for speech (VoXML) that could potentially be displaced by a new speech standard; also, wireless carriers were aggressively pursuing wireless data solutions that could displace speech-based applications.
We identified strong fundamentals for the core wireless and wireline markets. Consumer usage of the speech applications was rising, and deployments by carriers growing. Our revenue model built for the client was attractive - it just needed a longer timeframe to achieve financial success.
We also identified significant undervalued assets in their product portfolio - a strong API / developer environment. This API enabled 3rd party programmers to develop additional speech applications for deployment. The API was unique in the industry - but completely unleveraged as carriers were not interested in hosting 3rd party applications on their own networks due to security and authentication concerns.
We began looking into joint ventures with strong players in the enterprise market who could help to fund and unlock the value of this hidden asset while also providing financial security, and developed a 1st level screen of attractive merger and combination scenarios for our client to pursue.
Our client took action on our recommendation to seek out attractive partners to build a combined entity that could fully leverage the full suite of core technology competencies. First, they completed a merger with an enterprise applications developer which broadened their suite of applications expertise.
Next, they used our data on the potential synergy value of their API and other tools to secure a merger with the industry leading ASR provider on extremely attractive terms. This merger will provide a strong platform for growth and entry into the enterprise application market, unlocking the tremendous hidden value of their core assets.