Facebook Inc. (FB) recently acquired Wit.ai, a firm that develops voice recognition technology for wearable devices and Internet-connected appliances. However, the financial details of the deal were not made public.
Based in Palo Alto, CA, Wit.ai is an eighteen-month old company whose software can understand spoken words as well as written text phrased in “natural language”.
Wit.ai’s technology can be used by Facebook users to speak commands that could be converted to text as posts or messages. In this way, it can save them the annoying task of typing texts. Per reports, Facebook will hire some of Wit.ai’s employees including its three co-founders.
We believe that this acquisition will definitely add to Facebook’s user base in the near term, which, in turn, will drive growth, going forward.
The deal comes at a time when most technology companies are working to bring Internet connectivity to a new crop of devices, from watches to washing machines. In such circumstances, voice recognition technology in new devices will help companies to gain a competitive advantage.
Allthough it is not very clear as to how Facebook will integrate this newly acquired company into its system in the near term, yet we believe that the technical knowhow obtained from Wit.ai will definitely be of great help to Facebook in the long run.
Facebook like other tech giants including Apple (AAPL), Microsoft (MSFT) and Google (GOOGL) is continuously on the lookout for devices other than PCs, tablets and smartphones to access its service. In this way, it aims to widen its reach.
Facebook acquired headset-maker Oculus Rift in Mar 2014 for a whopping $2 billion with the same intent.
We believe that though these acquisitions may weigh on the margins of the company, the positive synergies will overshadow the near-term headwinds.
Currently, Facebook has a Zacks Rank #3 (Hold).
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