Nuance Communications Acquired by Microsoft in a Nearly $20B Deal

April 12, 2021
Microsoft office building
Photo: Shutterstock

Microsoft just announced one of its largest acquisitions to date.

On Monday, the tech giant announced that it entered a definitive agreement to acquire Burlington-based Nuance Communications for a total of $19.7 billion, which includes the company’s debt. Microsoft will pay $56 per share, which is 23 percent higher than the closing price of Nuance’s stock on Friday. Nuance’s stock price rallied on Monday following the news.

This is Microsoft’s second largest known acquisition, falling just behind the company’s purchase of Linkedin in 2016 for $26 billion.

So what makes Nuance so valuable for Microsoft? Nuance Communications is a company that specializes in conversational AI, speech recognition and cloud-based ambient intelligence. This is the type of technology that powers smart assistants like Siri, Google Assistant or Microsoft’s Cortana. It can recognize when a person is triggering a device with a voice command, understand what the person is saying and then use AI to fulfill that request.

Specifically, Nuance has built several AI products for the healthcare industry, including the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One. In a clinical setting, these products can listen in on conversations between a doctor and patient, use speech recognition to understand what they’re saying, and then transcribe that information into a patient’s electronic health records or use AI to identify potential medical issues.

A significant portion of the medical industry already uses Nuance’s products. According to the company, 55 percent of physicians, 75 percent of U.S. radiologists and 77 percent of U.S. hospitals all use Nuance products.

Microsoft has been recently growing into the healthcare industry. Last year, the company unveiled Microsoft Cloud for Healthcare in order to tap into the digital transformation that healthcare is currently undergoing. By acquiring Nuance, Microsoft aims to expand its tech solutions for healthcare and integrate Nuance’s products into its offerings.

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

But Nuance’s conversational AI also has potential to be used outside of healthcare. We’ve seen Microsoft explore speech-based AI with Cortana, so there’s the possibility that Microsoft could leverage Nuance’s technology to help with other voice applications as well.

“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,” Nuance CEO Mark Benjamin said in a statement. “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 — who brings intelligent cloud-based services at scale and who 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.”

The acquisition is expected to officially close in 2021. Benjamin will stay on as Nuance’s CEO, but he will report to Microsoft cloud and AI executive vice president Scott Guthrie. Nuance’s financials will be reported within Microsoft’s Intelligent Cloud segment.

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