In a strange slip up last November, Apple co-founder Steve Wozniak said that Apple had purchased Nuance Communications for its Speech recognition technology.  Apple, of course hadn’t, but the reason it was such big news was because the deal, on many levels, did make sense.

Apple’s acquisition of Siri is seen as a way to not only match Google’s speech recognition but then leapfrog Google with Siri’s Artificial Intelligence (shown below):

According to TechCrunch, Apple is significant negotiations with Nuance to either licence the software or even an acquisition of the company.

At the time of the Woz slip up, the company was valued at $5B (though shares went a little nuts that day, sorry).  Today, Nuance is worth $6B and an acquisition would likely be much more costly.  Apple however, has been building up a cash horde for just such an occasion and now has ten times more than Nuance’s value in the bank.

While TechCrunch says a deal is unlikely, a tie-up still makes a lot of sense.  Speech recognition is a core functionality for mobile devices now and even more in the future.  Google is even building its speech technology into its Chrome browser.

And apparently Siri is playing hardball.

We’re pretty sure Apple isn’t worried about screwing over Nuance’s other customers and it feels like Nuance CEO Paul Ricci is gunning for a buyout from this information.  But clearly, Apple is going to do what is best for Apple. TechCrunch notes that Apple used Skyhooks location DB until it was able to build its own.  Apple could negotiate a five year deal with Nuance while it builds out its speech recognition technology.

Again, from what we’re hearing, all types of possibilities are still on the table, including an acquisition. But again, that’s not as likely as an expansive licensing agreement at this point. In buying Nuance, Apple would immediately screw over several other competitors that use the technology and it would bolster their position. And given what Google has been building, it seems unlikely that the government would have a big problem with the buy.

With a likely unveiling of iOS 5 next month, a deal of some sort would appear imminent.

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