Highlights:
- Nuance, a company that provides speech recognition and conversational AI services.
- Microsoft acquires Nuance for $19.7 billion.
- Nuance is best known for its deep learning voice transcription service.
- Nuance had built several of its products on top of Microsoft’s Azure cloud.
Introduction:
Microsoft Corp (Nasdaq: MSFT) and Nuance Communications, Inc. (Nasdaq: NUAN) today announced they have entered into a definitive agreement under which Microsoft will acquire Nuance for $56.00 per share, implying a 23% premium to the closing price of Nuance on Friday, April 9, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt.
Microsoft has accelerated its efforts to provide industry-specific cloud offerings to support customers and partners as they respond to disruption and new opportunities. These efforts include the Microsoft Cloud for Healthcare, introduced in 2020, which aims to address the comprehensive needs of the rapidly transforming and growing healthcare industry. Today’s acquisition announcement represents the latest step in Microsoft’s industry-specific cloud strategy.
Nuance is a pioneer and a leading provider of conversational AI and cloud-based ambient clinical intelligence for healthcare providers. Nuance’s products include the Dragon Ambient eXperience, Dragon Medical One, and PowerScribe One for radiology reporting, all leading clinical speech recognition SaaS offerings built on Microsoft Azure.
Microsoft’s position in health care
Nuance’s reach in the health care market suggests Microsoft will recoup its $19.7 billion investment in a relatively short term. But being able to address this market is not a simple feat.
Other big tech companies, such as Apple and Google, already have health care initiatives that are much older than Microsoft’s. But Microsoft is especially well-positioned to take advantage of this new acquisition because of its business model.
Google and Apple are consumer companies. Microsoft, on the other hand, gets most of its revenue from enterprise customers. Its Office suite and its collaboration tools were already being used in many hospitals even before it announced its health care solution. That’s why it was already in a good spot to penetrate the market.
Beyond health care
Before the acquisition, Microsoft was already using Nuance’s Dragon AI technology in its health care solution, transcribing virtual visits, taking notes, and integrating information into patients’ health records. Now, with the acquisition of Nuance, Microsoft will also have full access to its technology and will be able to take its new AI transcription power beyond health care.
“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,” Microsoft says in its blog.
Microsoft’s AI strategy
Microsoft may be unable to predict about the company’s success in five years’ time. This is true especially in a field as volatile as AI. But it’s banking on the one constant that is a constant requirement in the field: compute power.
Microsoft uses its huge Azure platform to develop ties with companies. With this, they often provide them with subsidized access to its cloud-based machine learning tools. It also makes many of its investments in Azure credits. It ensures companies that its investments will be present within its platform. This puts Microsoft in a position to both help those companies grow and learn from them.
