Intelligent Input

Still, the three, and especially Tegic -- which counts Ericsson, NEC, Siemens, and Motorola as customers -- can brandish star-studded client lists from their overseas sales. Zi has also secured a number of attractive business deals and licensing agreements in China, a market that CEO Michael Lobsinger sees as crucial to Zi's fortunes.

To what extent these firms' client lists translate into Japan revenue is not clear. Of the three, only Zi, a listed firm, releases audited earnings data. The three rely on initial licensing fees plus a royalty stream from handset manufacturers, set-top box makers, or other clients who pay a certain amount each time they make a device enabled with one of the firm's technology. This emphasis on royalties means that most recent earnings statements are not the most important indicator of success -- which is just as well. While Zi's sales grew an impressive 96 percent year-on-year in the third quarter of 2000 and its payroll more than quintupled to 234, its operating loss increased by a whopping 232 percent. The firm, however, in a recent extremely upbeat statement, said it was on track for profit in 2001. For Slangsoft, in calendar 2000, when the firm introduced iTID, sales reached around $1 million, not a huge amount of money but about the same as Zi managed in the third quarter of 2000. Tegic offers no hints on sales.

Zi, which is listed on Nasdaq-US and the Toronto Stock Exchange, experienced the loving and leaving that investors bestowed upon many New Economy issues in 2000. The Calgary firm saw its Nasdaq share price climb to over $40 in 2000 -- from a low of 82 cents in 1999. But it dropped so suddenly from February onwards that Lobsinger had to issue a letter to investors in April to reassure them and to put an end to "misinformation" about his firm. Such misinformation included chat site postings alleging insider trading and predictions of his firm's demise. The letter, which began with the gravity-laden line: "Ordinarily, I would never write this type of letter, but the events of the past week are not ordinary," failed to work. Zi's share price ended up dropping further to finish 2000 around the $7 mark.

The high-tech bubble bursting has not outwardly affected Tegic, which had been considering an IPO, according to Tominaga. But by coming under the wing of America Online in 1999, Tegic will for the foreseeable future remain safe from fickle investors.

Slangsoft, which is in the process of obtaining second-round funding and does not intend to go public for a few years yet, was more affected by tech bubble burst fallout; spending enthusiasm among its Net-based clients slumped. "When you sell to Web-based application makers or search engines or Hotmail, of course you feel that those guys have to really consider their spending. They are more quiet now," Mazur says. Customers also tend to look for immediate financial benefits from using his product, he says, and adds that many have told him that they were looking long term, but now they're focusing short term -- to satisfy investors. This has rubbed off on Mazur, who says that rather than going public, his primary goal is to become profitable "like an old-economy company."

Tegic's online demo shows how easy it can be.

Another pure, as opposed to purely profit, motive also runs through Tegic, whose T9 came from co-inventor Cliff Kushler's work to create a technology that would help disabled people who could neither speak nor use a keyboard to input text. Kushler, a Japanese-speaking martial arts expert who researched his PhD at Tokyo University, and colleagues used a sensor with eight LEDs arranged in a circle that would react to eye movements. The LEDs represented an effective eight-key keyboard but raised the problem of how so few keys could handle a regular alphabet. Solving this dilemma provided the seeds for T9. Tegic is still involved in developing technologies for the disabled. "We have not forgotten our roots," says Tsuchiyama.

Though intelligent input technology may be based in worthy humanitarianism, the reality of its marketing is more bruising. Tegic and Zi have been locked in a war in the US over alleged patent violations on their Chinese-language technologies since March 1999. Insults as well as lawsuits have been flying; Tegic says Zi's main eZiText technology is "cumbersome." Zi says Tegic is merely using the courts to try to block Zi's progress in China. Tsuchiyama refuses to comment on the legal conflict, but the markets interpreted the outcome of the most recent skirmish as a victory for the Canadian firm. He says simply that T9 stands on its own merits. "Our product is validated by the market; we have been licensed by the majority of the world's leading handset manufacturers. One of the reasons companies go with us is because they believe we have superior patents."

Serious legal problems apart, the firms have yet to prove their Japanese text input systems on the market. Venture capitalist Grandsard says he would "definitely consider investing" in firms in this area, though he adds he's not sure he would jump at the chance. "The problem with these types of technologies," he says, "is that often they don't work that well." IDC's Williams has similar doubts. "People have gotten pretty proficient (with existing input systems), and they are used to tapping at the keyboard as it is now." He maintains that adding intelligent input systems complicates matters, since the user then has to go and learn a new system.

There is also the risk that someone will come up with effective voice-activated text input. "I think there is that chance," says Yoshinori Oikawa of Japan- and Israel-based Triangle Technologies, which offers support and investment for Internet ventures. "But the issue is how good is the voice-recognition technology." At the moment, technology to recognize natural speech is not very good, he says, but merging it with intelligent text input may be the answer. "Combining the two could be the killer app," says Oikawa.

But voice activation has its own problems, including considerations of privacy. Keypad text input allows people to silently and privately send messages without disturbing coworkers or exposing (the contents of) their message to coworkers or others nearby. Not so with voice-activated input. Mazur rather amusingly pinpoints one of the main weaknesses of voice-activated input -- you have to speak. "Not many would want to announce the date and time of their annual colon exam while standing in an elevator; even fewer would want to listen."