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Microsoft Buys Nuance for $19.7 billion

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Microsoft Nuance

UPDATE: As of Monday 12th April, Microsoft has confirmed the acquisition of Nuance for $19.7 billion USD, including Nuance’s net debt. CEO Satya Nadella comments in the announcement: ‘Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,' and continues: ‘AI is technology’s most important priority, and healthcare 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.'

Microsoft is in late-stage talks to purchase long-time collaborator Nuance Communications for $16 billion, according to Bloomberg News. The deal would represent Redmond's biggest acquisition since it bought LinkedIn for $24 billion in 2016.

Headquartered in Burlington, Massachusetts, Nuance has a broad portfolio of AI-based industry solutions that leverage Natural Language Processing (NLP), speech recognition and speech synthesis.

Bloomberg asserts that the acquisition is likely to increase Nuance's market acumen to $16 billion, a 23% increase on the company's share valuation of $45.58 at close of business last Friday.

Nuance has focused in recent years on research and development into machine learning applications for healthcare, whilst maintaining its longer-term industry position as the producer of veteran speech synthesis software Dragon Naturally Speaking. In February 2021, for the fourth successive year, Nuance was ranked first in Opus's Decision Makers’ Guide to Enterprise Intelligent Assistants.

In 2020 Nuance released a Voice-to-Agent messaging system with real-time transcription, designed to transform initial support center queries into text-based information aimed at both human respondents and AI-driven virtual assistants. In the same year, the company, which was founded in 1992, launched Nuance Mix, an SaaS service for integrating conversational AI into organizational channels, adopted across a range of sectors from gaming voice-control to care team collaboration systems.

Nuance's transcription services for telehealth are reported by Bloomberg to be the central impetus of the acquisition, since the company's Dragon Ambient eXperience (DAX) offering is already licensed by Redmond for Microsoft Teams.

Nuance's current market cap stands at circa $13 billion, with a 168.3% rise in share values over the past year, and reported revenues of $345.8 million in Q1. MSFT stock has risen by 5.% in the last week to a cap of $1.9 trillion USD.

Nuance had a net income of $91 million over revenue of $1.48 billion for the fiscal year at the end of September 2020, recovering from losses of $217 million in 2019.

Wedbush analyst Dan Ives commented that the acquisition would be a ‘trophy' for Microsoft, adding: “Nuance is in the midst of an unprecedented strategic turnaround the last few years under the leadership of CEO Mark Benjamin and we believe the company represents a unique asset on the health-care front for Microsoft.”

Nuance has invested heavily in Natural Language Understanding (NLU) for Interactive Voice Response (IVR) systems, and its Pathfinder product, which generates domain-specific conversational models from historical user interactions, has also been employed in the development of Apple's Siri virtual assistant.

Though there is no guarantee that this deal will close, Microsoft is actively looking to consolidate its portfolio of communications channel technologies in this period. The Nuance bid comes on the heels of failed negotiations in 2020 for TikTok, and a reportedly rejected $51 billion offer for image-based social media site Pinterest, which would have been Redmond's largest ever acquisition. Additionally, recent reports indicate that the tech giant is seeking to purchase video-game chat community Discord for $10 billion.