Microsoft buying speech recognition firm Nuance in $16 bn deal

This will join with Microsofts cloud, including Azure, Teams, and Dynamics 365, to deliver next-generation customer engagement and security solutions.The transaction is Microsofts second largest deal following its USD 26 billion purchase of LinkedIn in 2016. Ives said the transaction fits well into Microsofts health care portfolio and comes at a time that hospitals and doctors are embracing next-generation AI capabilities.Mark Benjamin will continue as Nuance CEO.

Microsoft, on an accelerated growth push, is buying speech recognition company Nuance in a deal worth about USD 16 billion.

Microsoft will pay USD 56 per share cash. That's a 23 per cent premium to Nuance's Friday closing price. The companies value the transaction including debt at USD 19.7 billion. Shares of Burlington, Massachusetts-based Nuance surged more than 17 per cent in Monday morning trading. Microsoft's acquisition of Nuance comes after the companies formed a partnership in 2019. The Redmond, Washington, company said that the deal will double its total addressable market in the health care provider industry, bringing its total addressable market in health care to nearly USD 500 billion. Nuance's products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all clinical speech recognition SaaS offerings built on Microsoft Azure. The company's products are currently used by more than 55 per cent of physicians and 75 per cent of radiologists in the U.S., and by 77 per cent of U.S. hospitals. Its health care cloud revenue experienced 37 per cent year-over-year growth in fiscal 2020.

"AI is technology's most important priority, and healthcare is its most urgent application," Microsoft CEO Satya Nadella said in a statement.

Aside from health care, Nuance provides AI expertise and customer engagement solutions across interactive voice response, virtual assistants, and digital and biometric solutions to companies in all industries. This will join with Microsoft's cloud, including Azure, Teams, and Dynamics 365, to deliver next-generation customer engagement and security solutions.

The transaction is Microsoft's second largest deal following its USD 26 billion purchase of LinkedIn in 2016. Last September, it bought video game maker ZeniMax for USD 7.5 billion. "This is the right acquisition at the right time with Microsoft doubling down on its health care initiatives over the coming years," Wedbush analyst Daniel Ives wrote in a note to clients. Ives said the transaction fits well into Microsoft's health care portfolio and comes at a time that hospitals and doctors are embracing next-generation AI capabilities.

Mark Benjamin will continue as Nuance CEO. The transaction is expected to close this year. It still needs approval from Nuance shareholders.