Microsoft will boost its health-tech offering with its second-largest acquisition to date.
Following weekend reports that it was close to a deal to acquire Nuance, Microsoft has confirmed its agreement to buy the conversational AI provider.
The all-cash transaction is higher than previously expected, valued at $19.7bn, as it includes Nuance’s debt. This makes it one of Microsoft’s biggest takeover deals to date, second only to its purchase of LinkedIn for more than $26bn in 2016.
Nuance CEO Mark Benjamin will continue in his role but will now be reporting to Scott Guthrie, executive vice-president of cloud and AI at Microsoft.
‘This is to some extent a customer acquisition story’
– J P GOWNDER
Nuance develops speech recognition technology that’s used by a range of clients, but the company has a particularly strong presence in the healthcare industry. Doctors and healthcare professionals can use Nuance’s tech to take and transcribe notes. The technology can also be used for electronic health records.
Nuance claims its technology is currently used by more than half of physicians in the US and three-quarters of radiologists. In all, the company has seen adoption in 77pc of US hospitals.
“This is to some extent a customer acquisition story,” said Forrester VP and principal analyst JP Gownder.
“Nuance’s strong position in the healthcare vertical means Microsoft is buying a customer base as much as anything else. But the technology story makes sense, too. Nuance’s strong position at the edge (medical dictation and transcription) will ultimately tie healthcare customers more strongly into Microsoft’s Azure Cloud and intelligent services.”
In its last quarter, Nuance reported $346m in revenue with $7m in profits. Its market cap as of Monday morning (12 April) was just under $13bn.
Microsoft previously partnered with Nuance to augment Microsoft Cloud for Healthcare and the company said this acquisition will double its total addressable market in the healthcare provider space to almost $500bn.
‘Nuance provides the AI layer at the healthcare point of delivery’
– SATYA NADELLA
“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” said Microsoft CEO Satya Nadella.
“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.”
The deal has been unanimously approved by the boards of both Nuance and Microsoft and is expected to close by the end of 2021.
Nuance is headquartered in Massachusetts but has offices around the world, including a base in Dublin that was opened in 2012.
Additional reporting by Jonathan Keane