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Investors listening to speech-recognition stocks

Shares of SpeechWorks triple in their trading debut, the latest indication that investors are turning bullish on the speech-recognition industry.

Shares of SpeechWorks tripled in their trading debut, the latest indication that investors are turning bullish on the speech-recognition industry.

SpeechWorks' shares surged to as high as $67.25 today before slipping slightly to $56.75. The initial public offering priced yesterday at $20, above the expected range of $17 to $19 a share.

Last month, America Online invested $5 million in SpeechWorks to provide voice-enabled services to its subscribers. AT&T also bought a stake to improve its customer service operations.

SpeechWorks also received one of the first investments made by Intel's $250 million Merced venture fund last year. The goal of the fund is to encourage the development of products that can run on Intel's 64-bit processor chips.

"These companies, without a doubt, are turning things around," said Jeff Hirschkorn, a senior analyst with IPO.com. "If you look at SpeechWorks' competitors, Nuance Communications came out a couple of months ago and is up over 700 percent, and Lernout & Hauspie is up 25 percent for the year."

SpeechWorks' success may also indicate a broadening of investors' taste beyond fiber optics and biotech IPOs, said David Menlow, president of IPO Financial Network.

"We're all in favor of having a new sector take hold," he said. "They had a real strong showing for a sector like this, and it caught us by surprise."

Speech recognition has long been viewed as an industry with tremendous potential. But the technology has struggled to catch on because of the high cost and customers' perception that it is difficult to use and prone to errors. The technology also requires high-speed processor power and large storage capacity.

The recent arrival of fast processors and a drop in memory prices, however, is expected to boost sales, analysts said.

SpeechWorks reported $5 million in revenues in the first quarter and a net loss of $600,000. Chase H&Q handled the sale.