Dear Mr. Berko:

Sometime during the first couple of months of 2010, my two brothers and I each bought 400 shares of Nuance Communications Inc. at about $22.50 on the advice of our broker, whom you recommended to us nearly 10 years ago. I trusted him and so did my two brothers, because he was always honest, his advice was mostly on the mark and he had a way of explaining things that we could understand. But he left Durham about four months ago and didn’t tell us where he was going. Our accounts were given to a 30-something kid, and all he wants to do is sell us annuities, mutual funds or exchange-traded funds. So we would like to know where he has gone. Nuance is now $25 and we need advice. The stock seems to have stalled here, and we need to know if we should keep the stock or take our substantial profit. We asked our current broker, who is a nice person, but he has no opinion and gave us a copy of a Goldman Sachs report that was bullish. We would never be comfortable trusting a Goldman Sachs report and would appreciate your personal opinion.

Dear F.R.:

I’m occasionally in touch with your old broker, whom I first met in 1991 when I spoke to an audience in Durham. He divorced his wife of 31 years, gave her every penny of his assets, including a huge home with no mortgage, married a wealthy client 20 years his junior and moved to a Southwestern state. That’s all I will tell you, except that he’s happy as a hog on ice.

Nuance Communications (NUAN-$22.82) has finally become a successful Star Trek-like technology company. In the not-so-distant future, most of us will be talking to our computers rather than memorizing a zillion keystrokes to access or manage data. NAUN is one of the worldwide leaders in voice control, voice commands and text-to-speech solutions for desktops, mobile phones, laptops, etc.

NUAN’s home office is in Massachusetts. It also has headquarters in Belgium and Australia, 6,009 employees, sales representatives in 70 countries, more than 4,000 patents, one of the largest libraries of speech data in the world and speech solutions that support 50 different languages. Meanwhile, various NUAN solutions have been shipped in more than 5 billion mobile phones and 70 million cars. There are more than 22 million registered desktop users, while more than 3,000 U.S. hospitals and 150,000 physicians use NUAN’s health-care solutions.

Though its biggest competitors are Microsoft Corp., Oracle Corp., Intuit Inc., Symantec Corp., Citrix Systems Inc., Activision Inc. and AVG Technologies NV, NUAN is recognized as the pure play in this field, with $1.4 billion in revenues that have increased 12-fold in the last decade. Earnings look to be strong, and NUAN expects to earn $1.56 per share this year after a 10-year string of losses.

However, I am concerned about NUAN’s balance sheet that claims more than $4 billion in total assets, which I think may be grossly inflated. NUAN’s quarterly report records $3.1 billion in goodwill and other intangibles. arbitrarily inflating its balance sheet and shareholders’ equity, which could create serious problems down the road. Wise investors prefer tangible book value, which is what remains after subtracting goodwill and intangibles from shareholders’ equity.

Using this metric, NUAN has a tangible book value of minus $660 million, which suggests the balance sheet lacks the strength to protect itself in a recession or from better-financed competitors. However, if management can continue to grow revenues and earnings that will create tangible value, the shares should do well. Keep the shares but place an open, good to cancel, stop loss on NUAN at 20 percent below the current price and move it up as the shares increase in value.