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Microsoft to buy speech recognition firm Nuance for $19.7 billion

A Microsoft building

Microsoft on Monday announced the acquisition of cloud and AI firm Nuance Communications for $19.7 billion, the second most expensive acquisition by Microsoft after LinkedIn.

The acquisition will help Microsoft scale up its healthcare technology infrastructure and will support its Microsoft Cloud for Healthcare initiative launched in 2020. Medical technology is at the front and centre due to the ongoing pandemic, and companies are scrambling to create new systems and data models.

Nuance will bring a number of useful technologies under the Microsoft umbrella, including the popular Dragon NaturallySpeaking speech recognition software. Apple’s Siri uses technology from Nuance for speech recognition. The AI company has already developed a set of healthcare solutions such as document capture, revenue management, patient management, diagnostics solution and electronic health record. The company claims its solutions dominate the US healthcare ecosystem.

Microsoft and Nuance have been partners since 2019 to streamline the administrative tasks in hospitals and clinics. The two companies envisioned an AI-powered EHR system that could transcribe patient-doctor conversations.

The Redmond-based company has its own technology stack such as Microsoft Azure Cloud and Azure AI which is in use in healthcare systems. The acquisition of Nuance makes sense as the two companies could further capture the healthcare technology market. The deal will effectively bring Microsoft’s total addressable market in the healthcare sector to $500 billion.

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

NASDAQ-listed Nuance has a strong business, and recorded a revenue of $1.47 billion in FY 2020, down from $1.52 billion in FY 2019. The FY18 revenue figure was $1.57 billion, so there has been a steady decline in revenues, indicating that growth may have stalled.

Nuance CEO Mark Benjamin will continue in his role after the acquisition, which is expected to be completed by the end of this year.

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