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Speaking Of Nortel And SpeechWorks...

Despite speculations of a possible acquisition looming over its rather large head, Nortel Networks soldiers on in the face of an economic climate that is anything but kind to telecommunications infrastructure providers. Thursday proved no different as the battered Canadian firm pledged to work with Boston-based SpeechWorks International Inc. to deliver speech applications to enterprise and carrier customers.

Nortel Networks and SpeechWorks will combine Nortel's speech processing platform OSCAR (Open Signal Computing and Analysis Resource) IVR (interactive voice response) with OpenSpeech Recognizer, the speech recognition engine for which SpeechWorks is best known.

OpenSpeech Recognizer employs VoiceXML, (yes, the chirpy sister of XML) which provides interactive capability with the Web via phone or voice-capable browser when combined with voice recognition technology. Simply, a person can grab their phone and access the Web with their voice.

With Thursday's deal, Nortel hopes to marry SpeechWorks' user interface with its OSCAR IVR deployment application to offer natural language speech applications for getting information such as flight status, or conducting banking transactions. And the firms think they can monetize these voice services, which according to market research firm Kelsey Group's estimates could top $41 billion.

IDC Corp. seems to believe in speech recognition services. The market research firm said key drivers adopting automated voice include travel and transportation services, finance, retail, government, and utilities.

"Cost reduction and improved customer satisfaction are driving customer-facing enterprises to deploy speech recognition technologies," said Mark Winther, IDC's group vice president of Worldwide Telecommunications research. "While the customer reaps value by obtaining self-service access to information about flight reservations, stock quotes, catalog orders, or tax refunds, the company absorbs the benefit of reducing its labor costs by minimizing call flow to live agents."

Which is probably part and parcel of what Nortel was thinking when it tapped SpeechWorks. Basically, Nortel has the ability to roll OSCAR IVR out, but it needed the technology SpeechWorks offers with its OpenSpeech Recognizer interface to entice the enterprise.

For SpeechWorks, whose applications are deployed by the likes of America Online, the pact should yield some major exposure as Nortel's customer vein runs deep, particularly overseas.

"Nortel Networks is a recognized leader in global communications solutions with a major presence in telecommunications and international markets," said Stuart R. Patterson, chief executive officer, SpeechWorks. "This agreement with Nortel Networks will help SpeechWorks to extend the benefits of OpenSpeech Recognizer into international markets, while offering Nortel Networks customers the added value of a core speech technology optimized for open standards."

Nortel is carrying on with business as usual despite analyst speculation that it's $16.8 billion market value may be snatched up by a major networking power; namely, Cisco Systems Inc. UBS Warburg issued a report Wednesday saying that Nortel's wireless and optical equipment could help Cisco spring into the telecommunications field. But as ripe as Nortel may be, for Cisco to take such a risk may be a long shot.

"For Cisco to acquire a big company like Nortel or Lucent would be a leap of faith. Cisco hasn't done (that), and has not demonstrated expertise in those type of acquisitions," the UBS Warburg report said.

Even Cisco's top brass seems to think so as its Chief Executive Officer, John Chambers, quashed the specualtion at a luncheon in Toronto earlier this month.

"You will see us move into new markets this year with a combination of stock and cash," Chambers said. He added that it's "not in the cards for us to acquire large companies."