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Nuance Acquisition Marks a Major Move by Microsoft in Health Care

With its second-biggest acquisition to date, Microsoft is massively increasing its bet on becoming a prime mover in health care tech.

Microsoft on Monday announced the planned acquisition of Nuance Communications for $19.7 billion. Boards of both companies unanimously approved the deal, which is expected to close this calendar year. Only Microsoft's $26.2 billion payment for LinkedIn in 2016 was larger in dollar terms.

Burlington, Mass.-based Nuance historically has a broad portfolio of artificial intelligence (AI) technology, including optical character recognition (OCR), and had a role in the speech recognition technology used by Apple for Siri. Recently, through divisional sales and repositioning, the company has been refining its focus to health care and enterprise AI. The company's core technology is primarily focused on speech recognition and transcription.

Microsoft's messaging about the deal heavily emphasizes the health care opportunity.

"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 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."

[Click on image for larger view.] Mark Benjamin will remain as Nuance CEO, reporting to Scott Guthrie at Microsoft. (Source: Nuance Communications)

According to Microsoft, the deal doubles Microsoft's total addressable market in the health care provider space, where Microsoft is competing for attention and dollars with Amazon Web Services (AWS) and Google.

For health care providers, Nuance offers conversational AI and cloud-based ambient clinical intelligence. Products include the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting. All three of the clinical speech-recognition platforms run as SaaS offerings atop Microsoft Azure.

For Microsoft, the health care-specific AI reinforces the company's Microsoft Cloud for Healthcare and other moves in the sector. Microsoft also plans to leverage Nuance's experts and technologies in interactive voice response (IVR), virtual assistants and biometric solutions.

In addition to the Azure foundation for Nuance's SaaS products, the companies are already technologically intertwined. They announced a major partnership in 2019 for joint work on the Nuance Dragon Medical platform and on Microsoft's Project EmpowerMD Intelligent Scribe Service, as well as underlying Azure technologies.

Mark Benjamin, who will remain CEO of Nuance reporting to Scott Guthrie, the executive vice president of Cloud & AI at Microsoft, said the deal is important for the continued growth of Nuance's business.

"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," Benjamin said.

The all-cash transaction represented a 23 percent premium to Nuance's closing price on Friday, April 9.

Posted by Scott Bekker on April 12, 2021 at 1:29 PM


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