Microsoft buying speech recognition firm Nuance in USD16B deal

AP – Microsoft, on an accelerated growth push, is buying speech recognition company Nuance in a deal worth about USD16 billion.

The acquisition will get Microsoft deeper into hospitals and the health care industry through Nuance’s widely used medical dictation and transcription tools.

Microsoft will pay USD56 per share cash. That’s a 23-per-cent premium to Nuance’s Friday closing price. The companies value the transaction including debt at USD19.7 billion.

Shares of Burlington, Massachusetts-based Nuance surged about 16 per cent in Monday trading.

Nuance has been a pioneer in voice-based artificial intelligence (AI) technology and was instrumental in helping to power Apple’s digital assistant Siri. It has since shifted its focus to healthcare, including a product that listens in on exam room conversations between physicians and patients and automatically writes up the doctor’s recommendations, such as for prescriptions or lab work.

People walk near a Microsoft office in New York. PHOTO: AP

“This clinical documentation essentially writes itself, giving physicians time back to focus on patient care,” Microsoft CEO Satya Nadella said on a conference call about the deal on Monday.

Microsoft and Nuance had already formed a business partnership in 2019. That relationship grew during the pandemic, enabling Nuance to bring its patient-physician transcription services into telehealth appointments using Microsoft’s video conference app Teams. The Redmond, Washington, software giant said that this month’s deal will double its potential market in the healthcare provider industry to nearly USD500 billion.

“Put Microsoft and Nuance together and it allows Microsoft to go after the exploding health care market, which is on fire right now as it’s modernising, adopting digital engagement and moving to the cloud,” said Forrester analyst Kate Leggett.

Nuance’s products include clinical speech recognition software offerings such as Dragon Ambient eXperience, Dragon Medical One and PowerScribe, all of which are now built on Microsoft’s Azure cloud platform. The companies said Nuance products are used by more than 55 per cent of physicians and 75 per cent of radiologists in the United States (US), and by 77 per cent of US hospitals. Revenue from its healthcare cloud business grew 37 per cent year-over-year in fiscal 2020.

“AI is technology’s most important priority, and healthcare is its most urgent application,” Nadella said.

Microsoft also has its own digital voice assistant, Cortana, but its use has been limited compared to similar consumer-oriented systems from Amazon, Google and Apple. Nuance has sought to refine its voice recognition technology beyond consumer use to better understand the complexities of medical jargon.