“One Company Dominates the Future” Oxford Club

I don’t know exactly when this email might have first circulated, but it touts a stock that the folks at the Oxford Club believe should be the top grower, and best performer, of 2008.

Naturally, they’d like you to subscribe to receive their special report — it’ll cost you $79 a year, which may or may be your cup of tea. Oxford Club Communique, their newsletter that you get when you join the club, does indeed have a good long term record. Not outlandishly good, but they have outperformed the Wilshire 5000, on average, over many years.

But of course, if you just want the name of their “one stock” that will be the best this year … read on!

It’s all about speech recognition software, and they tease this as a “David beats Goliath” idea, since the big guys like Microsoft have almost all had buckets of trouble trying to develop accurate speech recognition software. They further explain that this is the actual practical kind of speech recognition — the kind that is supposed to be able to recognize anyone’s voice, not the personal voice recognition software that you have to train to recognize your individual voice, which has been pretty successful for many years but has limited utility because each instance needs to be customized.

There are several speech recognition companies, though — so which one is this?

We get a few clues, naturally … here’s a snippet:

“However, all that has changed due to advances by our favorite company – the world leader in state-of-the-art speech-recognition software.

“In fact, this company sells more speech and imaging software to businesses and consumers than anyone. The company has more than 2,000 corporate customers, including automobile manufacturers, doctors, lawyers, hospitals, and cell-phone makers.

“And why has the company been so successful?

“In a word, savings. Their low-cost software provides customers with dramatic cost reduction and efficiencies in their operations.

“For example, it costs about 40 cents per call to have an automated system handle a company’s customer service inquiries, versus about $4 for a human. That’s a 90% cost reduction.”

OK, that’s a pretty good start. Anything else to feed into the mighty Stock Gumshoe Thinkolator?

“This company already owns the killer application in [medicine]. It’s used by over 50,000 physicians in North America alone. It converts speech into text at an astounding rate with an accuracy of over 98%….

“… its PDF Converter software allows users to create, convert and edit PDF files. The company’s application converts text into high quality male or female speech….

“Plus, it’s no pipe dream. With a $2+ billion market cap, this is a solid company with a core of believers behind it.”

Ah … now that makes it appear as though this teaser ad might be a few months old. Not sure, of course, but they at least got their market cap data from a little while ago. Or exaggerated (heaven forbid!)

Because, the Thinkolator thinks, this is …

Nuance Communciations (NUAN)

This is the company that makes the market-leading voice/speech recognition software under the Dragon brand name — and they also do indeed have software that they call PDF Converter. But although it remains a $2+ billion company, it hasn’t actually gotten down to $2 billion for a long time — it was right around $3 billion when it hit its recent trough right around the beginning of the year, with the shares down around $15. Today you can pick up shares for about $20 if you like, and the market cap is about $4 billion.

So … this is indeed the big daddy of independent speech recognition companies (independent meaning that they’re not owned by IBM or Microsoft or one of those big bad wolves), and they do have a good market position. They do claim to have 50,000 doctors using their software, and there are continuing promises from virtually all the speech recognition companies that speech transcription software will be the killer app for the medical software business.

Unfortunately, speech recognition has been the “next big thing” that’s going to change the landscape for at least ten years — and for at least ten years I’ve been hearing that the real breakthrough in use will be “just two years away.”

Maybe they’re right this time — maybe all those medical transcribers will be out of a job in a couple years as Dragon and Nuance take their place, but for once I think I agree with Jim Cramer on this … there have been too many investors trapped by the promise of this technology, only to be disappointed again and again. Even if I accept that at some point this technology will be good enough to take over for more real people — and clearly it is good enough in some situations, as you’ve probably used it yourself in any kind of customer service phone system — I have no idea when that will really happen to a degree that enables investors to be enriched by the trend.

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