Microsoft buys speech recognition pioneer for US$19.7 billion

Microsoft has announced it has entered a "definitive agreement" to buy global technology firm Nuance Communications, a pioneer in speech recognition, for US$19.7 billion.

Formed in 1992, Nuance is best known for helping to develop Apple's Siri speech recognition software. It employs more than 1,600 people globally and is active in 28 countries.

The deal will be the second largest in Microsoft's history. It paid US$26.2 billion for LinkedIn in June 2016.

Nuance is a leading provider of conversational artificial intelligence and cloud-based ambient clinical intelligence for healthcare providers. Its products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all leading clinical speech recognition software as a service (SaaS) offerings built on Microsoft's Azure cloud platform.

Nuance’s solutions work seamlessly with core healthcare systems, including long-standing relationships with electronic health records (EHRs) to alleviate the burden of clinical documentation and empower providers to deliver better patient experiences. Nuance's  solutions are currently used by more than 55 per cent of physicians and 75 per cent of radiologists in the US, and used in 77 per cent of US hospitals, Microsoft said in a statement.

Nuance’s Healthcare Cloud revenue experienced 37 per cent year-on-year growth in the fiscal year ended September 2020 as remote doctor visits and telehealth have become commonplace in many countries during the COVID-19 pandemic lockdowns.

Microsoft said buying Nuance builds upon the successful existing partnership between the companies that was announced in 2019. By augmenting Microsoft Cloud for Healthcare with Nuance’s solutions, as well as the benefit of Nuance’s expertise and relationships with EHR systems providers, Microsoft will be better able to empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services.

The acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in health care to nearly USS$500 billion. Nuance and Microsoft will deepen their existing commitments to the extended partner ecosystem, as well as the highest standards of data privacy, security and compliance.

"Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI," said  Microsoft CEO Satya Nadella.

"AI is technology’s most important priority and health care is its most urgent application. Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud for Healthcare and Nuance."

History in the making! We are committed to solving our customers’ biggest challenges and we are taking that to a new level with @Microsoft. Aligned with a shared mission, together we will empower others with technology that helps them achieve EVEN more! https://t.co/FJlHpOVX6w

— Mark Benjamin (@MarkB_Nuance) April 12, 2021

Beyond health care, Nuance provides AI expertise and customer engagement solutions across interactive voice response (IVR), virtual assistants, and digital and biometric solutions to companies around the world across all industries. This expertise will come together with the breadth and depth of Microsoft’s cloud, including Azure, Teams and Dynamics 365, to deliver next-generation customer engagement and security solutions.

"Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions," said Nuance Communications CEO Mark Benjamin.

"To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care. The path forward is clearly with Microsoft — which brings intelligent cloud-based services at scale and which shares our passion for the ways technology can make a difference.

"At the same time, this combination offers a critical opportunity to deliver meaningful and certain value to our shareholders who have driven and supported us on this journey."

Microsoft is to pay US$56 per share for the Burlington, Massachusetts-based business, which is about 23 per cent higher than where Nuance shares were trading on Friday.

The transaction has been unanimously approved by the Boards of Directors of both Nuance Communications and Microsoft. The deal is intended to close by the end of this calendar year and is subject to approval by Nuance’s shareholders, the satisfaction of certain regulatory approvals and other customary closing conditions.

Upon closing, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment.