Nuance buys Vlingo, builds a voice technology giant

Nuance Communications (s nuan) and fellow Boston-area voice recognition rival Vlingo Inc. have put away their knives and are now set to become one company with the announcement Tuesday that Nuance was buying its competitor for an undisclosed sum. The two companies are set to take on the exploding opportunity in providing natural language interfaces to a growing number of companies.

Nuance, which helps power Apple’s Siri (s aapl), has been a leader in the space but has had to contend with rival Vlingo, which also has similar technology and has put out its own Siri-like personal assistant app. Nuance previously sued Vlingo for patent infringement, but a federal jury sided with Vlingo in August. The companies were apparently contemplating further litigation, but now that all falls to the wayside as the two put aside their differences to make money together. Nuance said the combined company will go after a $5 billion opportunity enabling phones, tablets, cars, televisions, navigation devices, music players and PCs with intelligent voice recognition and analysis.

Here’s what the two CEOs had to say. First, Mike Thompson of Nuance:

Inspired by the introduction of services such as Apple’s Siri and our own Dragon Go!, virtually every mobile and consumer electronics company on the planet is looking for ways to integrate natural, conversational voice interactions into their mobile products, applications, and services. By acquiring Vlingo, we are able to accelerate the pace of innovation to meet this demand.

Meanwhile, Vlingo CEO Dave Grannan downplayed the two companies past differences to focus on their common business model:

Vlingo and Nuance have long shared a similar vision for the power and global proliferation of mobile voice and language understanding. As a result of our complementary research and development efforts, our companies are stronger together than alone. Our combined resources afford us the opportunity to better compete, and offer a powerful proposition to customers, partners and developers.

It’s a sign of where the market for natural language interface and voice recognition is going. As the technology gets deployed in more apps, devices and machines, it’s about building up big systems that learn from all the utterances users make. For Nuance to continue to be a leader, it needs to keep adding technology and building on its database, developing more sophisticated techniques to parse speech and determine user intent, not just their words. Adding Vlingo helps Nuance build a more robust product as it goes up against systems from Google (s goog) and Microsoft(s msft).

But the deal also means fewer options for developers and companies looking to incorporate a third-party solution into their systems. Now Nuance is in a position to become the main provider of voice processing and recognition to customers who don’t have the technology in-house.

As I wrote earlier this year, voice technology is increasingly become mobile technology, something we’re starting to see a glimpse of with Siri. My colleague Kevin Fitchard also expanded on the growing opportunity as companies like Nuance build more artificial intelligence and new multimodal means of interaction. When combined with all the sensors already packed into a phone, voice can help transform the mobile user interface. This is going to be a big opportunity, especially as smartphone use soars.

Nuance is already working with IBM (s ibm) and its Watson technology to add more analytics and natural language processing to its product. Vlingo also has been building in more intelligence into its assistant app, so it can understand what actions people want to accomplish. In a Siri world, Nuance is showing it needs to get smarter and it’s doing that through partnerships and now a very key acquisition.