Giants Bet on Voice Recognition for E-Commerce

Joining Microsoft (Nasdaq: MSFT) and IBM (NYSE: IBM) who have made similar moves, America Online is betting that speech-recognition will soon become a key component of e-commerce transactions.

According to reports, AOL has invested $5 million (US$) to buy a one percent share in the privately held SpeechWorks International, an innovative Boston, Massachusetts-based company that provides language software and services for the Internet.

Under the agreement, AOL reportedly retains the right to increase its share to four percent of the company, which plans to go public in the near future. As part of the deal , SpeechWorks, whose current customer list includes United Airlines, will develop voice portals for AOL's online Internet services and AOLTV.

Talk about E-Commerce

Analysts believe that the widespread adoption of speech recognition technology will help e-commerce reach its true potential. Freeing shoppers from their keyboards, e-commerce over cellular phones and other mobile devices could lead to an explosion of online purchases, especially among those who shy away from computers.

Last fall, research firm Killen & Associates estimated that by 2003, 30 million small and mid-sized businesses worldwide will invest $8.1 billion for voice services such as speech recognition and Internet telephony. Already, voice recognition plays a key role in Internet systems to be installed in many General Motors vehicles in coming years.

Walking the Walk

By staking a claim in the voice recognition field, America Online is following in the footsteps of such high-tech giants as Microsoft and IBM, who have already bought stakes in or acquired speech recognition firms.

Last fall, Microsoft bought Entropic, Inc., which develops voice recognition software. Around the same time, IBM and Phillips Electronics announced they would work together on speech technology.

Other companies are following the voice recognition path as well. Intel (Nasdaq: INTC) has invested $30 million into a joint venture with Lemout & Hauspie Speech Products NV, one of the largest speech recognition software firms in Europe.

Meanwhile, just last month, SpeechWorks struck a deal with AT&T for a two-way sharing of technology that the firms say will build on AT&T's technology that allows callers to activate a menu of options by speaking at prompts, rather than pressing buttons on a keypad.

SpeechWorks also has a deal with Net2Phone to share voice recognition technology.

SpeechWorks IPO on Horizon

In April, SpeechWorks filed a registration statement with the U.S. Securities and Exchange Commission for an initial public offering (IPO) of its stock. The company hopes to raise about $63 million through the offering.

According to Hoover's Online, SpeechWorks is recording 1999 sales of $14 million, an increase of 139 percent over the previous 12 months.