Zi fends off Nuance on path to profitability

Few among us think about the technology crammed into our handheld devices. Our cellphones and PDAs get smarter each year, even guessing the words we are going to write with a few key touches by using powerful predictive-text software.

Today’s Financial Post Magazine covers predictive-text software maker Zi Corporation and the Calgary company’s recent hostile takeover offer from American rival Nuance Communications.

One of the masters of predictive-text software is Zi Corp., a little-known 21-year-old Calgary developer that attracted attention after fending off a hostile US$40-million takeover offer in August from its American rival, Nuance Communications Inc. Zi Corp. isn’t turning a profit at this point, but even so, the reason for Nuance’s interest in the company is clear: Zi controls roughly 30% of the growing market for predictive-text software, and sells to giants such as Sony Ericsson and Nokia. If acquired, it would have boosted Nuance’s market share to a whopping 85% to 90%, meaning it would provide software to most of the 1.3 billion cellphones sold around the globe each year.

Apparently the genius of Zi’s software is its tiny size and price – their 30,000 word English dictionary takes up about 100 kilobytes and sells for only 10 cents per handset. Nuance’s motive for a takeover is clear – remove any price competition in the market.  Hang in there Zi.