How many top-level Microsoft executives have been in the same job for 20 years? By Rick Rashid’s count, he’s the only one. That sort of continuity says a lot about Microsoft Research, the in-house invention factory that Rashid was recruited from Carnegie Mellon to run in 1991.

It’s still growing—up to about 850 PhDs and a total of 1,200 people worldwide, at centers from Beijing to New England. As Redmond lab director Peter Lee said, “the sun never sets on Microsoft Research.”

“If you look at the history of the company, there’s been so much value that has come out of Microsoft research that really it’s now just this pipeline, and no one really questions,” Rashid says. “I mean, no one comes to me and worries about what the pipeline’s going to be in a few years. They look at what we’ve already got and they like that, and they just figure, ‘Well, I guess he knows what he’s doing, he’s been doing it for a long time.’ And I think that’s really the key to making these things work.”

Investors have certainly questioned the business value of having a standalone research organization. But Rashid says that over the years, from Bill Gates to Steve Ballmer and beyond, the company’s executives have seen value in keeping the lights on.

And that’s how Rashid sees the value of a research stable: You can’t stuff its work into a product roadmap or financial timeline. But one day, your company will need to tap into the work that it’s doing.

A prime example, Rashid says, is the Kinect motion-sensing camera for the Xbox—probably the best-known example of a product that came out of the research arm. When executives came calling, Microsoft Research already had been plugging away on the elements that would make it possible. It turned out, he says, “frankly, better than anybody really expected. I had no idea what we really could do in that space.”

“So research, in some sense, is about being ready when someone comes to you with a problem or with an opportunity. It’s not about reacting to a problem or an opportunity, because you’ll be too late,” Rashid says. “And that’s really been incredibly successful for us. We built groups in speech recognition and 3D computer graphics and computer vision before there was any part of Microsoft that really cared about any of those things. But when the company needed it, we were there.”

At anniversary celebrations around the globe today, Microsoft showed off some more new ideas that its researchers are producing, from a more efficient search-indexing technology called “Tiger,” to some cool augmented-reality software and sensor systems, which made a stack of virtual blocks rise off a table and even beamed an image of a person onto the surface via the Kinect camera, a la Princess Leia’s “help me, Obi-Wan” moment in Star Wars. (GeekWire’s Todd Bishop was at the Redmond event too, and captured some from-the-bleachers video of the presentation).

One thing they actually refused to let the outsiders photograph was called OmniTouch—Microsoft is apparently demonstrating it again at a conference in the near future. It’s a setup that turns movable surfaces, including your hand or a notepad, into a touchscreen interface like a tablet computer or smartphone screen. The hardware is still a prototype right now, but principal researcher Andy Wilson said miniaturization of the bulky shoulder-mounted camera-and-projector setup could easily follow: “Maybe it’s a kind of thing that’s on a lapel, or maybe on some future Bluetooth headset kind of thing.”

The explosion of real-world data capture, and the ability to crunch those numbers cheaply and quickly, is perhaps the biggest driver of new-frontier research that Rashid sees right now. It’s making formerly arcane and difficult pursuits much easier, and spreading computer science know-how to all kinds of areas of life.

“Those kind of technologies are really going to change the way we think about doing everything: the way we do science, the way we do urban planning, the way we do medicine,” Rashid says.

One very current example of widespread technology that has been given a big boost by big data is language processing, a key feature in today’s upgrade of Microsoft’s new “Mango” version of its Windows Phone system.

“We’ve been doing speech recognition for a long time. Just in the last few years it’s gotten really pretty darn good. You look at something like Windows Phone Mango which has a really good speech engine built into it,” Rashid says. “My 12 year-old—I gave him a Windows phone—that’s how he uses it. Any program he wants to run, he just says the name of the program and it just goes there. He’s just decided the speech interface is the fastest way for him to do things.”

After 20 years, Rashid doesn’t seem to be particularly near the end of his run. Asked how much longer he could be doing this job, he demurred. Although he joked that he wouldn’t be making the 40th anniversary presentation, it seems there are too many surprises to pack it in just yet.

“Some of the stuff you hear about it, and you say ‘wow,’” Rashid says. “I remember when David Heckerman, one of our researchers, first started telling me about some of the work he and his people had been doing with the AIDS community, and some analysis of how the AIDS virus attacks the immune system. My first reaction was, ‘Wow, I didn’t know we were working on that. And my second reaction was, ‘Why are we working on that?’

“Now, some of that work’s actually in a vaccine trial. Not only that, if you go to AIDS conferences, you see a lot of references to the work that’s being done at Microsoft Research—which, again, pretty weird. But it makes sense in that the field of computer science now interpenetrates with almost every other field of science. You almost couldn’t not do that.”

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Nuance Communications (NASDAQ: NUAN),a Burlington, MA-based maker of speech software, announced today it has agreed to acquire Equitrac for $157 million in a cash transaction expected to close in Nuance’s fourth quarter of fiscal year 2011. Equitrac is a maker of print management software and will be rolled into Nuance’s document management units.

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Editor’s Note: This is Part 1 of a three-part story that we originally published on January 3, 5, and 6, 2011. We’re highlighting it today because the series was just named by Longform.org as one of its top technology stories of 2011.

Already, it’s hard for anyone with a computer to get through a day without encountering Google, whether that means doing a traditional Web search, visiting your Gmail inbox, calling up a Google map, or just noticing an ad served up by Google Adsense. And as time goes on, it’s going to get a lot harder.

That’s in part because the Mountain View, CA-based search and advertising giant has spent years building and acquiring technologies that extend its understanding beyond Web pages to other genres of information. I’m not just talking about the obvious, high-profile Google product areas such as browsers and operating systems (Chrome, Android), video (YouTube and the nascent Google TV), books (Google Book Search, Google eBooks), maps (Google Maps and Google Earth), images (Google Images, Picasa, Picnik), and cloud utilities (Google Docs). One layer below all of that, Google has also been pouring resources into fundamental technologies that make meaning more machine-tractable—including software that recognizes human speech, translates written text from one language to another, and identifies objects in images. Taken together, these new capabilities promise to make all of Google’s other products more powerful.

The other reason Google will become harder to avoid is that many of the company’s newest capabilities are now being introduced and perfected first on mobile devices rather than the desktop Web. Already, our mobile gadgets are usually closest at hand when we need to find something out. And their ubiquity will only increase: it’s believed that 2011 will be the year when sales of smartphones and tablet devices finally surpass sales of PCs, with many of those new devices running Android.

That means you’ll be able to tap Google’s services in many more situations, from the streets of a foreign city, where Google might keep you oriented and feed you a stream of factoids about the surrounding landmarks, to the restaurant you pick for lunch, where your phone might translate your menu (or even your waiter’s remarks) into English.

Google CEO Eric Schmidt says the company has adopted a “mobile first” strategy. And indeed, many Googlers seem to think of mobile devices and the cameras, microphones, touchscreens, and sensors they carry as extensions of our own awareness. “We like to say a phone has eyes, ears, skin, and a sense of location,” says Katie Watson, head of Google’s communications team for mobile technologies. “It’s always with you in your pocket or purse. It’s next to you when you’re sleeping. We really want to leverage that.”

This is no small vision, no tactical marketing ploy—it’s becoming a key part of Google’s picture of the future. In a speech last September at the IFA consumer electronics fair in Berlin, Schmidt talked about “the age of augmented humanity,” a time when computers remember things for us, when they save us from getting lost, lonely, or bored, and when “you really do have all the world’s information at your fingertips in any language”—finally fulfilling Bill Gates’ famous 1990 forecast. This future, Schmidt says, will soon be accessible to everyone who can afford a smartphone—one billion people now, and as many as four billion by 2020, in his view.

It’s not that phones themselves are all that powerful, at least compared to laptop or desktop machines. But more and more of them are backed up by broadband networks that, in turn, connect to massively distributed computing clouds (some of which, of course, are operated by Google). “It’s like having a supercomputer in your pocket,” Schmidt said in Berlin. “When we do … Next Page »

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Seattle-based Vulcan Capital, the venture firm of Microsoft co-founder Paul Allen, has participated in a $15 million Series E round for Audience, a Mountain View, CA-based voice processing semiconductor company. New Enterprise Associates, Tallwood Venture Capital, and VentureTech Alliance also participated in the funding, which was all raised from existing investors. Audience designs chips, for mobile phones and telecommunications applications, that suppress background noise and improve the audibility of speech. The company has raised $75 million in total.

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Craig Mundie is a geek, and I mean that in the best possible way. Microsoft’s chief research and strategy officer, the 17-year veteran of Redmond, WA, still talks like an engineer, throwing out terms like “heterogeneous machine architectures,” “GUIs” (graphical user interfaces), and “clouds and clients” like there’s no tomorrow. It’s kind of refreshing, given that he is in charge of setting the long-term agenda for one of the most powerful companies on the planet.

Mundie is in the midst of a weeklong tour of some top universities around the country. He called me yesterday from Cambridge, MA, where he had just finished a presentation to Harvard University students, faculty, and guests. He visits the University of Illinois at Urbana-Champaign (my alma mater) today, and comes to Kane Hall at the University of Washington tomorrow afternoon. It’s similar to the college tours Bill Gates used to do.

From what I can tell, the goal is to stir up interest in computer science, give audiences a glimpse of future computing systems as Microsoft sees them, and stimulate discussions about how these technologies can help solve some pressing global problems. (You can read more about Mundie’s tour and demos in this Seattle Times story.)

Besides hearing Mundie’s thoughts on computer science education and the future of computing, I wanted to drill down and ask him about the challenge of taking on Microsoft’s strategy development (after Gates stepped down last year) in the most difficult economic times in recent memory. I also wanted to ask him about the deeper culture of Microsoft, the renewed role of research in the company’s future, and the importance of nurturing relationships around the world—and his secret ally in that quest.

Here are some edited highlights from our conversation:

Xconomy: What are you trying to get across to university audiences on this tour?

Craig Mundie: In these presentations, I’m trying to get them to think not only about how computing evolves, but with that evolution, what kinds of problems will become approachable, and what are the new methods? Several things are evolving in parallel [and leading to more heterogeneous and complex machines]. That begets the requirement of how to do programming around parallel computing. With very high-scale computing facilities, the cloud and the client come together to form one system that people will program. They will use those things together with new display and sensing technologies.

Just as the GUI revolutionized computing, we could see a similar revolution with more natural interactions with machines, rather than just “type and point and click.” That will expand the number of people who can interact with computers. With the diversity, rooms can become computers [for instance]. You won’t think of them so much as a computer.

X: What are some of the global problems you think advanced computing will help solve?

CM: Beyond the computer science realm, I’ve talked about energy and the environment. I show one piece of research work we’re doing to compose computational models, a simplified climate model, at Princeton and Microsoft Research. It shows linkages between deforestation in the Amazon and atmospheric temperatures around the rest of the world. If you were a policy person, these kinds of things would give you tools to support your decision making.

In energy, we’re doing computer modeling and direct visualizations. I showed a model, loaned to us from TerraPower [the nuclear power firm spun off from Nathan Myhrvold’s Intellectual Ventures … Next Page »

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[Updated 9/3/09, 3:00 pm. See below.] Bellevue, WA-based VoiceBox Technologies, a developer of speech recognition systems for use in cars and mobile applications, has raised about $13 million from corporate investors in Asia over the past year. The investors include AutoNavi, Inventec, MiTAC, and the Morningside investment fund.

[An earlier version of this story cited a regulatory filing stating that VoiceBox had raised $7.4 million in equity and options out of an $18.6 million offering, and said the investors were not disclosed---Eds.]

Chief strategy officer Victor Melfi of VoiceBox says the company has raised a total of about $21 million to date, including investments from friends and family, and InfoSpace. He adds that VoiceBox is now looking to raise an additional $15 million from institutional investors, for which it has signed on Seattle investment bank Cascadia Capital. Melfi says VoiceBox is sensitive to customers in Europe and Asia—particularly China—and that it is developing technology for nine different languages. [This paragraph was added at 3:00 pm after speaking with Melfi---Eds.]

VoiceBox is developing what it calls “conversational voice search” software that lets you search, navigate, and discover content and services using natural spoken language. An example would be telling your car to give you directions to a particular location, pick a song to play, and adjust the temperature—all while you’re driving. Or telling your smartphone to search for a stock quote or other information online while you’re on the go.

Technologically, it’s a very hard problem. That’s because of ambient noise, differences between people’s accents and the way they make requests, and, fundamentally, the challenge of correctly understanding the meaning of what they’re asking for. Voicebox has partnerships with a number of companies including IBM, Toyota, and XM Satellite Radio to refine its software. The company also has an iPhone app for voice dialing.

VoiceBox was incorporated in 2001, and is led by its co-founder, chairman, and CEO Mike Kennewick, a former manager at Digital Equipment Corporation and then Microsoft. Kennewick previously founded Saros, a document management software company that was bought by FileNet in 1996. As of January 2008, VoiceBox had not taken any venture funding, but was considering taking a round, according to VentureBeat.

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When you’ve been at Microsoft for 17 years, you’ve seen a few things. This morning, Craig Mundie, Microsoft’s chief research and strategy officer, shared some of his hard-earned wisdom in a keynote talk at company headquarters in Redmond, WA—helping to kick off Microsoft Research’s 10th annual faculty summit.

Mundie outlined his broad thoughts on the future of computing and Microsoft’s role in it—and went into pretty good depth in spots. Nothing too earth-shattering, but it was cool to hear the technologist discuss the roadmap of where his company may be headed with more of a research and innovation hat on, and not much marketing slickness. The backdrop of his talk was that computing devices are becoming more and more pervasive (at least in wealthy countries), so what are the emerging opportunities? “Computing everywhere will be something we take for granted,” Mundie said. “But it was not common knowledge as little as 15 years ago.”

“Today, computers work at your command,” Mundie continued. His vision, he said, is that they will transition to “working on your behalf.”

Here are my top five takeaways from his talk:

1. It’s all about the natural user interface.

Today’s devices are able to understand voice, handwriting, and touch commands better than ever before, but nobody has really put it all together yet. “All the things we talk about as natural user interfaces have been largely used one at a time as enhancements to [graphical user interfaces],” Mundie said. Gesture recognition, expressive responses, immersive 3-D virtual environments, and understanding of context—these advances in computing algorithms will lead to software that is “better at anticipating what you might want.” (Mundie said that Nathan Myhrvold, who hired him, pointed out that early movie cameras were used to film plays before people experimented with them to create new kinds of film experiences. In the same way, better user interfaces will lead to new ideas about how to use software, Mundie implied.)

2. It’s time for the digital assistant—but fear not, real assistants.

Mundie showed a demo of Microsoft researcher Eric Horvitz talking to a “robotic receptionist” (on a screen) to schedule a meeting. The software used machine vision to track Horvitz’s movements, gaze, and orientation to the screen, speech recognition to understand what he was saying, and speech synthesis to communicate back to him—all in real time. Mundie admitted each element was still rough, but … Next Page »

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If you want to dictate notes into your computer without typing, speech recognition software like Dragon Naturally Speaking, from Burlington, MA-based Nuance Communications (NASDAQ: NUAN), works surprisingly well these days. Even without training, dictation software can hit accuracy rates of 99 percent; once it learns your personal speech patterns, it’s nearly flawless.

But using speech commands to do almost anything else on your computer is far more difficult. Nuance says the latest version of Dragon Naturally Speaking can be used to control applications such as Microsoft Word, Outlook Express, and Internet Explorer, and the software even includes “voice shortcuts” that let users interact with search engines using natural-language utterances like “Search the Web for global warming articles.” But for complex, oft-repeated command-and-control operations, like opening or closing windows or moving blocks of text in a document, using natural language commands can be tedious. It also tends to be slower than using mouse and keyboard commands, since the software has to spend a good deal of time figuring out what you meant before it acts. For the large group of computer users who turn to speech recognition software because of repetitive strain injuries (RSI)—and who aren’t supposed to touch their computers at all, lest they aggravate their condition—that’s a dangerous situation.

That’s the problem—and the opportunity—that Boston-based Redstart Systems has set out to address. After nearly 15 years of behind-the-scenes software development, the tiny, self-funded startup today launched a program called Utter Command that vastly speeds up command-and-control operations for Windows computer users who already have Dragon Naturally Speaking Professional.

The secret to Utter Command isn’t speech recognition—it depends on Naturally Speaking as its speech engine—but rather its ability to parse “stacked,” shorthand commands. For example, instead of laboriously saying, “Move the cursor to the end of the sentence, select the last three words of the sentence, and delete them,” an Utter Command user would simply say “End 3 befores delete.” (In this example, “befores” is shorthand for “words before”—and is a good example of the way Utter Command clips things down.)

At $395, the new program isn’t cheap. But it may be a worthwhile investment for people who really can’t touch their computers. And if you view it as a powerful add-on that makes up for features missing in Naturally Speaking Pro, which retails for $899, the price tag seems even more reasonable.

Redstart president and founder Kimberly Patch, a science writer who has worked at PC Week and Technology Research News, says she first conceived the software in the mid-1990s when she developed a repetitive strain injury from typing on her computer. “I started out using Dragon Dictate 1.0, but I got frustrated with it and starting writing macros to speed things up,” Patch says. “But I’d forget half the macros I wrote, and then I’d have to rewrite them. I realized it was easier to remember standardized commands. I was writing about things like cognition and linguistics, and it turned out that this made sense according to the cognitive studies; there are MRI studies that show that certain things are easier to say than others.”

What Patch was discovering (as she explains in a series of papers on the Redstart website) was that sticking to a small set of commands, and arranging them according to a precise grammar, might actually create a lower cognitive load on a user than trying to speak to a computer as if it were a person. It would probably ease the load on the computer, too, since the software wouldn’t have to anticipate all the different ways a person might phrase a command in natural language.

Patch started writing down the commands in her grammar to make sure she was using them consistently. A bit later on, she found a programmer to help her incorporate the commands and the grammar into an application. And about five years ago, she decided to turn the application into a product.

But getting it working the way she wanted and writing up the documentation “took a lot longer than I thought it would,” she says. On top of that, there was an ethical concern. “With RSI, you can type, but you don’t want to, and if you get frustrated with something, you will hurt yourself,” she says. “We wanted to make sure our system was not going to … Next Page »

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Burlington, MA-based Nuance Communications is wrapping up its long and sometimes contentious crusade to acquire Zi, a Canadian competitor in the market for text messaging software, which has agreed to Nuance’s $35 million buyout offer.

The deal, announced today, provides shareholders of Calgary-based Zi (NASDAQ:ZICA) with 34 cents in cash and 0.4 shares of Nuance (NASDAQ:NUAN) stock for every share of Zi stock. That values the company at 69 cents per share—or a 73-percent premium over the closing price of the stock on its last day of trading before Nuance began its tender offer to acquire Zi shares on November 25. (Hindsight is 20-20, but the Nuance offer that Zi rejected back in August was worth $40 million, or 80 cents per share.)

Zi’s board has unanimously accepted the offer; now it needs to be approved by Zi’s shareholders, at a meeting scheduled for April. Zi offers Nuance its line of products that speed entry of text messages, correct typos, among other features. The acquisition would also eliminate a competitor to Nuance’s speech-to-text technology.

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After its last bid to acquire Calgary, Alberta-based Zi Corporation (NASDAQ: ZICA) for $0.40 per share expired on Friday, Burlington, MA-based speech technology giant Nuance Communications (NASDAQ: NUAN) now says Zi has until February 13 to respond to its offer. The board at Zi, which makes software for quickly typing text into mobile devices that competes with Nuance’s speech-to-text systems, has repeatedly rejected Nuance’s takeover offers, as we reported in August and November. In its Friday announcement, Nuance emphasized that its current offer represented a 25 percent premium over Zi’s closing price on August 13, prior to Nuance’s first acquisition bid—but the offer is actually below Zi’s current market price (the company was trading at around $0.41 per share this morning). After Zi rejected Nuance’s August bid, Nuance filed a patent infringement lawsuit against the Canadian firm.

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Burlington, MA-based Nuance Communications, shortly after announcing yesterday that it will raise $175 million in a stock sale to private equity firm Warburg Pincus, revealed that it has reached a deal with IBM to incorporate the computing giant’s speech technology into Nuance products. Nuance said it “expects the first integrated speech innovations combining Nuance and IBM technologies to be available within two years.” Nuance also bought the rights to several speech-related IBM patents; the companies aren’t saying how much money changed hands.

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Private equity powerhouse Warburg Pincus will buy 17.4 million shares, or $175 million worth, of Nuance Communications (NASDAQ: NUAN) common stock, Nuance announced today. The Burlington, MA-based speech and imaging technology company said it will use the funds to support M&A activity and general corporate purposes. Warburg Pincus will also acquire a warrant to purchase approximately another 3.9 million shares that is good for four years. The common stock deal is expected to close in February.

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Cambridge, MA, startup Vlingo today launched a drastically improved version of its voice command and speech-to-text interface for RIM Blackberry smartphones, first released in June. The free vlingo 2.0 software, which works on Blackberry Pearl, Curve, and 8800 series phones, not only allows users to compose text messages and e-mails by speaking into their phones, but also lets them create status updates for Facebook and Twitter and launch built-in Blackberry applications such as the address book, the camera, the memo pad, or the calendar and third-party applications such as Google Maps, the Opera browser, or Viigo.

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[Story Updated 4:40 p.m. 6/18/06; see below]

If a Texas district court grants an injunction sought by Burlington, MA-based Nuance Communications (NASDAQ: NUAN), it could force Yahoo to shut down the voice-enabled version of its mobile search platform. The search tool is powered by software from Vlingo, a Cambridge, MA-based startup Nuance sued yesterday for alleged patent infringement.

The Yahoo (NASDAQ: YHOO) platform, called oneSearch with Voice, works on Blackberry Pearl, Blackberry Curve, and Blackberry 8800 series smartphones, and allows users to enter Web search queries such as “Boston Red Sox scores” or “United Airlines Flight 541″ simply by speaking them into the device. Vlingo’s deal to get its speech recognition technology included in oneSearch was seen as a major coup for the Harvard Square startup, which has about 35 employees and recently closed a $20 million Series B financing round led by Yahoo.

Nuance filed its lawsuit in the United States District Court for the Eastern District of Texas, a jurisdiction famous for favoring plaintiffs in patent-infringement cases. Xconomy obtained a copy of Nuance’s complaint. It alleges that Vlingo’s speech recognition software—including “without limitation, products and services Vlingo is supplying to Yahoo! oneSearch”—infringes on U.S. Patent No. 6,766,295, which was issued to Nuance engineers Hy Murviet and Ashvin Kannan in 2004. The patent covers a technique for making computerized transcription of a users’ speech more accurate over time using audio samples from multiple sessions such as phone calls.

The suit seeks unspecified monetary damages and attorney fees, and also asks the court to “preliminarily and permanently restrain” Vlingo and its business partners from making, using, and selling the allegedly infringing software. Those partners would presumably include Yahoo.

“Nuance has invested significant resources in developing technologies, building solutions and acquiring intellectual property,” Jo-Anne Sinclair, vice president and general counsel of Nuance Communications, said in a press release announcing the lawsuit. “These inventions and the intellectual property protecting those inventions are a cornerstone of our business. We take great pride in and place significant value on our patents and will aggressively protect our intellectual property rights through all available means.”

A spokesperson for Vlingo said that company executives were still reading through the lawsuit and were not ready to comment publicly.

While their technologies may or may not be similar, Nuance and Vlingo have definitely shared personnel. Vlingo’s chief technology officer and co-founder, Michael Phillips, is a former Nuance employee; he landed there in 2003 when Nuance (called Scansoft at the time) acquired Speechworks, a Boston-based MIT spinoff where Phillips was principal scientist. After Phillips left Nuance, he waited a year for his non-compete agreement with the company to expire before starting Vlingo, according to the Boston Globe.

(Full disclosure: Mike Phillips is brother-in-law to Greg Huang, Xconomy’s Seattle editor. Greg was not involved in the reporting, writing, or editing of this story.)

Update 4:40 p.m. 6/18/06:

Vlingo sent Xconomy the following response to Nuance’s lawsuit from Vlingo CEO Dave Grannan:

“We believe this lawsuit is unfounded. Nuance has referenced a patent that has serious limitations in its coverage. The patent does not apply to vlingo-developed technology nor the third-party licenses we employ; moreover, we have significant doubts regarding the patent’s validity. Industry observers will recognize this as typical counterproductive behavior of filing frivolous lawsuits in an attempt to stifle competition.

Vlingo will fight the lawsuit aggressively to its conclusion, while continuing to build on our tremendous momentum we’ve gained in less than one year since our public launch.”

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Burlington, MA-based speech software company Nuance Communications said today that it will sell 5,575,000 shares of common stock to the public at $18.15 per share in an offering that will close on June 10. If sole underwriter Thomas Weisel Partners exercises an option to buy additional shares, the offering could pull in as much as $115 million for the company, money it plans to use for including “working capital and to fund possible investments in and acquisitions of complementary businesses, partnerships, minority investments, products or technologies,” according to an announcement.

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Text messaging, a longstanding habit among many Asian and European mobile phone users, is finally catching on with Americans. A major survey commissioned by Cambridge, MA-based speech-to-text software company Vlingo shows that 55 percent of all U.S. mobile subscribers send text messages—and 42 percent use their phones for texting as much as they do for calling. All of which is great news for handset manufacturers and cellular providers, who often charge by the message.

The bad news is that 28 percent of all survey respondents admitted to sending text messages while behind the wheels of their cars—which, let’s just be plain, is an incredibly stupid form of multitasking. Remember all those studies out of the University of Utah showing that talking on a mobile phone while driving reduces even a young person’s reaction time to that of a senior citizen? Texting is worse. Much worse.

And the practice is even more widespread among young people: 50 percent of teenagers surveyed in the Vlingo study and 52 percent of respondents aged 20 to 29 admitted to driving while texting, or “DWT.”

“To us, the message in the data is that we’ve got a problem now, but it’s going to get a lot worse as the younger generation comes up,” says Dave Grannan, Vlingo’s CEO. “It’s our belief that this is a serious public policy and safety issue that we need to address both with public policy and technology.”

We’ll get back to that “technology” part in a moment—since Vlingo does, of course, have an idea in mind about how software can reduce the danger from DWT. “Obviously there is some self-interest for us in putting out a report like this,” Grannan says. “The fact is that we’re a speech-to-text company, and we think there are hands-free solutions that can be developed.”

But in fairness, it should be said first that Vlingo didn’t set out to study the DWT issue specifically. It commissioned the independent research firm Common Knowledge Research Services to survey nearly 5,000 U.S. consumers from 48 states about their general text-messaging habits.

And in the process it discovered some interesting tidbits: almost 30 percent of respondents, for example, send more than 100 text messages per month, and 18 percent send more than 250. Almost 35 percent said that if they were unable to send text messages, it would have a negative impact on their lives. Among those who don’t text, the leading reasons were that it’s too expensive, that it takes too long, and that typing on a phone keyboard is a hassle.

It was when the researchers asked people about their texting behavior on the road, however, that things really got scary. Asked how often they drive and text simultaneously, 6 percent said they do it once a day, 8 percent said they do two to 10 times a day, and 1.5 percent said they do it more than 10 times a day. Among teenagers, 14 percent said they engage in DWT two to 10 times a day, and 8 percent said more than 10 times a day.

Texting from the road would be distracting enough if everyone had a Treo, a Blackberry, an iPhone, or some other device with a full QWERTY keyboard. But the survey found that 89 percent of respondents still have phones with standard 12-button keypads, which means they have to tap each key up to three times to get the letter they want. And if you’re watching your phone’s screen to see which letter you’re on, you’re probably not … Next Page »

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Nuance Communications (NASDAQ: NUAN), the Burlington, MA-based provider of speech-related software technologies and services, including the Dictaphone system used by hundreds of thousands of doctors to dictate clinical notes over the phone, said yesterday that it will purchase Needham, MA-based eScription. The company makes automated speech-to-text software that turns dictated medical notes into rough first drafts, which are then polished by professional medical transcriptionists. Nuance said it will pay $363 million for eScription—$340 million in cash and $23 million in Nuance common stock.

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Yesterday Yahoo smiled upon Harvard Square, not only picking Dunster Street startup Vlingo to provide a speech recognition system for its oneSearch mobile search program, but putting up a whopping $20 million in venture capital to finance the company’s expansion. After publishing our story on the deal, we reached Vlingo CEO Dave Grannan at the CTIA Wireless conference in Las Vegas, where Yahoo announced the Vlingo partnership.

Grannan revealed a few details that weren’t in circulation yesterday—including the fact that Yahoo is now Vlingo’s exclusive marketing partner. (Which isn’t too surprising, considering that the second-round investment more than triples the company’s venture stake.) Read on for the details on this and other aspects of the agreement.

Xconomy: Tell me how the Yahoo deal came together. Did this start out as a software partnership that then led to an investment deal, or was it the other way around?

Dave Grannan: We started working with Yahoo last fall when they were evaluating speech technologies. They knew they wanted to do something with speech technology in their mobile products, so we entered a bake-off where they compared us against other companies. And they told us the results were so dramatically better than anything else they had seen on the market that they wanted to license the technology. But one of the things they also wanted to do was invest.

X: So does Yahoo have a pot of money that they invest in partners or suppliers who are going to help them expand into new technology areas?

DG: I don’t think it works exactly like that. They’re not like, say, a Nokia with Nokia Ventures or an Intel with an Intel Capital. They don’t really have a venture capital operation. But from time to time they do make these strategic investments.

X: It’s a pretty big strategic investment, compared to your Series A round. How will you use the money?

DG: Yes, our first round in December 2006 was for $6.5 million, so this is significant. Primarily, we’ll use it for internal expansion. A big part of it will go to developing our technology in other languages. What Vlingo does that is unique in the market is unconstrained speech recognition. You can say anything you want, and our software will recognize it. That’s the intellectual property we’ve developed. At the core speech-engine level, languages don’t really matter—but this adaptive loop we’ve built to allow unconstrained speech has to be built language by language. So the bulk of the investment will go for developing the product in other languages and to some extent for the sales and marketing operations we will need to build in Europe and Asia.

X: I assume you’ll be working with Yahoo on versions of the program that work on devices other than the Blackberry (which is all it works on now)?

DG: Yes, we’ve got a whole road map laid out. Between now and the end of the year we’ll have voice-enabled oneSearch working on other smart phones like Windows Mobile phones, as well as full-featured regular phones like J2ME and Brew phones.

X: Can you also license the Vlingo software to other mobile search providers, or do you now have an exclusive relationship with Yahoo?

DG: The relationship is exclusive both ways—meaning that Yahoo only buys speech recognition from Vlingo and Yahoo is the only mobile search provider we can sell to. The one exception we have, the one “out,” is if a wireless operator were to say, “Vlingo, we’d like you to voice-enable everything we have,” and they happened to use some other search provider. Then we’d be allowed to do that.

X: Do you feel that Yahoo is a big enough partner that it was okay to forego those other licensing opportunities?

DG: That’s right. You could ask, ‘Why are you getting an investment from Yahoo, a strategic investor, rather than just another venture capital investor,’ and the answer is what you just said. Yahoo has contracts with 29 wireless operators who cover 600 million users globally. From our perspective, if Yahoo invests and is on our board of directors and is bringing us to 29 partners around the world with 600 million subscribers, and we have Yahoo really caring about not just how well our product performs but how well the company does—that was just a set of assets and resources that no financial investor could give us.

X: When I visited you guys last August you were just moving into your Dunster Street offices, which were mostly still empty. I imagine things are a lot busier now.

DG: We’ve had quite a bit of growth since then. We were maybe 11 or 12 people when you visited. We are 35 people today.

X: Will the work on adding more languages involve opening offices in other countries, or do you plan to do most of that work here in Cambridge?

DG: Most of the R&D will always go on here in Cambridge. We may hire some consultants in international language development for the short term, but for the foreseeable future, we’ll keep all of the R&D in Cambridge and then hire the occasional sales or marketing person in Europe.

X: What stake in the company did Yahoo take as a result of their investment?

DG: I’m not able to say on that one—we’re sworn to secrecy.

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Speech-recognition startup Vlingo, which had just moved into its new Dunster Street digs in Harvard Square when I visited last August, has settled in with two major wins, both relating to Yahoo. At the CTIA Wireless conference in Las Vegas this morning, keynoter Marco Boerries, the executive vice president of Yahoo’s Connected Life division, unveiled a new voice-activated version of Yahoo’s oneSearch mobile search engine powered by Vlingo’s speech-recognition technology. At the same time, Vlingo announced the closing of a $20 million Series B funding round led by none other than Yahoo.

The new voice-enabled version of Yahoo oneSearch is available starting today at m.yahoo.com/voice, though only in the United States, and only for owners of Blackberry’s Pearl, Curve, and 8800 series devices. I downloaded the program to Bob’s Blackberry, and it translated my spoken words into text search terms with near-perfect accuracy for most of the phrases I tried, such as “Boston Red Sox,” “United Airlines Flight 541,” “burritos in Cambridge, Massachusetts,” and “Kevin Spacey” (star of the new movie 21, which we’ve been writing about quite a bit lately).

Occasionally the search results themselves were a bit unpredictable: When I told the phone to look up “New York Marathon,” it sent me today’s weather conditions in Marathon, New York (37 degrees and sunny). And unfortunately, the software’s adaptive speech-recognition algorithms, which depend on a mix of grammar-based analysis and statistical machine learning techniques, didn’t fare well with the statistically uncommon word “Xconomy.” The first time I tried it, it translated my speech into “Mexicana de,” and the second time it went for “Tommy.” There doesn’t seem to be a way to verbally spell out words that the search engine can’t transliterate—but on the Blackberry you can easily correct the software’s mistakes by selecting alternative interpretations from a drop-down menu under the search term, or just by using the keyboard to delete and re-type a word.

Yahoo launched oneSearch at the Consumer Electronics Show in Las Vegas in 2007; the program’s main selling point is that it aggregates many types of search results—such as websites, weather reports, sports scores, photos, and news articles—on a single results page, making it easier to find the information you’re seeking on a mobile device with limited screen size and input options. The voice-enabled Blackberry version of oneSearch makes that process even simpler. In its announcement today, Yahoo said that it expects the “oneSearch with Voice” product to be available on more devices (and for users outside the United States) “over the coming months.”

Existing Vlingo investors Charles River Partners of Waltham, MA, and Sigma Partners of Boston also joined the company’s new funding round, which brings its total venture funding to $26.5 million. A Yahoo representative will join Vlingo’s board of directors as a result of the investment.

“Having a strategic investor of Yahoo!’s stature in the industry is a great validation of what has been built at Vlingo,” Izhar Armony, a general partner at Charles River Ventures, said in today’s funding announcement. “We look forward to having Yahoo! as an investor to help us grow this business.”

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