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Microsoft To Acquire Nuance Communications for $16 Billion in All Cash Deal

Microsoft has agreed to pay $56 per share for the natural language recognition company, a 23% premium over Friday's closing price.

Image source: Nuance Communications

Microsoft Corporation (Nasdaq: MSFT ) is buying speech recognition company Nuance Communications Inc (Nasdaq: NUAN ) in an all-cash transaction that values Nuance at $19.7 billion, including debt. 

Under the terms of the deal announced Monday, Microsoft will pay $56 per share — a 23% premium over Nuance’s closing price on April 9 — for a total cash consideration of about $16 billion, according to a press release.

After the transaction’s anticipated close later this year, Mark Benjamin will continue as Nuance’s chief executive officer and report to Scott Guthrie, executive vice president of cloud and artificial intelligence at Microsoft.

Nuance, a Massachusetts-based company that sells software tools that helps transcribe speech, helped launch Apple Inc's (Nasdaq: AAPL ) voice assistant, Siri. Now focusing on healthcare and enterprise AI, Nuance spun off and sold a number of its less profitable units, according to Reuters.

The acquisition builds on a 2019 partnership between the two companies to automate clinical administrative work, according to Microsoft. 

Nuance’s products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One, all clinical speech recognition SaaS offerings built on Microsoft Azure. 

Its products are currently used by more than 55% of physicians and 75% of radiologists in the US and by 77% of hospitals across the country, according to Nuance.

To meet an “accelerated demand for advanced conversational AI and ambient solutions,” Benjamin said Nuance needs “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,” he said.

Microsoft chief executive officer Satya Nadella described Nuance as “a pioneer in the real-world application of enterprise AI” in healthcare.

“AI is technology’s most important priority and health care is its most urgent application,” he said. “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.”

The acquisition marks Microsoft’s second largest after its $26 billion purchase of professional networking site LinkedIn in 2016. 

Last September, the software giant purchased ZeniMax Media for $7.5 billion, one of the largest video game acquisitions in history. 

Microsoft was in the running last year to buy short video app TikTok’s US assets for as much as $30 billion after the Trump administration attempted to force a sale over security concerns with the Chinese-owned company. Microsoft eventually backed out of the deal. 

Bloomberg recently reported that Microsoft was in talks with gaming chat app Discord for a deal worth more than $10 billion.

“For Nadella & Co, this is the right acquisition at the right time with Microsoft doubling down on its healthcare initiatives over the coming years,” Wedbush Securities analysts Dan Ives and Strecker Backe wrote in a research note. 

“In our opinion, Microsoft is on the M&A warpath over the next 12 to 18 months and Nuance could be the first step in an increased appetite for deals in 2021 with Discord (video game chat community) another potential trophy for Redmond,” they wrote.

The analysts also believe it is a good move for Nuance, which “has been in the midst of an unprecedented strategic turnaround” under Benjamin and will help “further integrate” the company’s advanced speech technology throughout Microsoft’s consumer and enterprise ecosystem in coming years. 


Source: Equities News

As the markets put the debt ceiling debacle in the rearview mirror, more than a few issues remain open.