Microsoft to buy Nuance Communications for $19 billion

Microsoft intends to boost its cloud healthcare business with voice recognition deal

Microsoft announced on Monday that it has entered into a definitive agreement to acquire AI speech recognition firm Nuance Communications for $19.7 billion (about £13.7 billion).

As part of the all-cash deal, Microsoft will pay $56 (40.50) per Nuance share, implying a 23 per cent premium over Friday's closing price.

The deal is inclusive of Nuance's net debt, and is intended to close by the end of this calendar year, subject to approval by regulators, Nuance's shareholders, and other customary closing conditions, according to Microsoft.

With this acquisition, Microsoft intends to combine solutions and expertise to boost its cloud healthcare business. The move could also allow Microsoft to expand the technology beyond healthcare industry.

Based in Burlington, near Boston, Nuance is prominent in the type of voice recognition technology that is currently being used by more than 55 per cent of physicians and 75 per cent radiologists in the US.

Nuance's conversational AI tools are well-versed in specialised medical terms and can capture and document every word of a physician during their encounter with patients.

More than 77 per cent of the hospitals in the US use Nuance products including the Dragon Ambient eXperience, Dragon Medical One, and PowerScribe One. They all are SaaS offerings built on Microsoft Azure.

Nuance's Dragon software, which uses deep learning to transcribe speech, can adapt to a particular user's voice to improve accuracy.

Last year, the Microsoft also integrated Nuance's Dragon Ambient eXperience into its Teams communications software to "broadly scale virtual consults aimed at increasing physician wellness and providing better patient health outcomes".

Microsoft said that the telehealth workflow solution built on Microsoft Teams will synthesize "physician-patient conversations during virtual visits through Microsoft Teams, allowing physicians to remain focused on the patient instead of taking notes on the computer".

Beyond healthcare, Nuance Communications also provides AI expertise across virtual assistants, Interactive Voice Response (IVR), and biometric solutions to businesses around the world.

Microsoft expects the deal to increase its potential healthcare market to nearly $500 billion (£362 billion).

"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.

"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."

The Nuance acquisition will be Microsoft's second largest under Nadella.

In 2014, Microsoft acquired the Mojang AB, the owner of the Minecraft videogame, within months of Nadella becoming the chief of the company. Two years later, the company spent about $26 billion (£18.8 billion) to acquire professional network LinkedIn Corp.

In 2018, code-collaboration site GitHub was acquired by Microsoft for $7.5 billion (£5.43 billion).

The company is now said to be in talks for buying the chat app Discord for about $10 billion (£7.2 billion).

Last year, Microsoft also made efforts to acquire the US business of Chinese social media app firm TikTok for about $30 billion (£21.7 billion) before the talks fell apart.