Microsoft Corp. today announced that it is purchasing Nuance Communications Inc. for $19.7 billion. The companies said Microsoft will combine Nuance's experience in artificial intelligence in voice interfaces and healthcare with its cloud computing offerings.
Microsoft has built on its Robotics Developer Studio with support for the Robot Operating System (ROS) in Windows 10, Linux, and the Azure Web services. The software company has been focusing on industry-specific cloud/edge computing, including Microsoft Cloud for Healthcare. Its projects for intelligent robotics include “responsible conversational AI.”
Burlington, Mass.-based Nuance Communications said its conversational AI and “ambient intelligence” are used by 77% of U.S. hospitals and 85% of Fortune 100 companies worldwide. The company's products include Dragon Ambient eXperience, Dragon Medical One, and PowerScribe One for radiology reporting. All of these clinical speech-recognition products are built on Microsoft Azure and offered through a software-as-a-service (SaaS) model.
Nuance added that its systems are designed to work with core healthcare systems, including electronic health records (EHRs), to alleviate the burden of clinical documentation and empower providers to deliver better patient experiences. It added that more than 55% of physicians and 75% of radiologists in the U.S. use its systems.
Nuance to augment healthcare cloud offerings
Microsoft said it acquisition of Nuance builds upon the partnership between the companies that was announced in 2019. The companies said they expect Nuance's SaaS and relationships with EHR systems providers to augment the Microsoft Cloud for Healthcare. Microsoft claimed that it will be better able to empower healthcare providers with ambient clinical intelligence and other cloud services.
Nuance reported that its Healthcare Cloud revenue grew 37% year over year in the fiscal year that ended in September 2020.
In addition, Microsoft said the purchase will double its total addressable market (TAM) in the healthcare provider space, bringing it to nearly $500 billion. The companies said they will deepen their existing commitments to the extended partner ecosystem, as well as maintain standards of data privacy, security, and compliance.
“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” stated Satya Nadella, CEO of Microsoft. The company had previously marketed Cortana as a its voice assistant but planned to shut it down this year.
AI is technology’s most important priority, and healthcare is its most urgent application. Together with @NuanceInc, we will put advanced AI solutions into the hands of professionals to drive better decision-making and create more meaningful connections. https://t.co/ipdP6qZTx9
— Satya Nadella (@satyanadella) April 12, 2021
In addition to healthcare, Nuance supplies interactive voice response (IVR), virtual assistants, and digital and biometric solutions to companies in other industries around the world. Microsoft said this expertise will join with Azure, Teams, and Dynamics 365 “to deliver next-generation customer engagement and security solutions.”
“Over the past three years, Nuance has streamlined its portfolio to focus on the healthcare and enterprise AI segments, where there has been accelerated demand for advanced conversational AI and ambient solutions,” said Mark Benjamin, CEO of Nuance. “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,” he added.
Deal terms
Microsoft said it will acquire Nuance for $56 per share, implying a 23% premium to the closing price of Nuance on Friday, April 9, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt. Benjamin will remain CEO of Nuance and will report to Scott Guthrie, executive vice president of cloud and AI at Microsoft.
The transaction has been unanimously approved by the boards of directors of both Nuance and Microsoft and is expected to close by the end of this calendar year, subject to approval by Nuance’s shareholders, the satisfaction of certain regulatory approvals, and other customary closing conditions.
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