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IBM is only being slightly paranoid. They have a valid concern. Some day, I say in the next decade, we'll have enough processing power for the work to be all done on the handset. Meanwhile Siri's service (and Dragon Dictate and any similar) has to do something to prove the security AND confidentiality of their service.
This is fairly similar to the "don't put anything in the cloud that you wouldn't want anyone else to read" advice. We hear about on-line security breaches and even encryption bypasses almost every day now.
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