UPDATE: Just as the rumors suggested, Microsoft has paid $16 billion for speech technology and AI firm Nuance. Including debt, the value of the transaction is $19.7 billion. As we noted yesterday, Nuance played an important role in the launch of Apple's virtual assistant Siri by creating the speech recognition technology originally used by Apple. The latter now uses its own in-house technology for Siri.
While announcing the deal on Monday morning, Microsoft finance chief Amy Hood said, "Over the past seven years, we’ve taken a consistent approach to mergers and acquisitions of all sizes." Hood said that Nuance should see revenue expand under Microsoft. CEO Satya Nadella stated that the deal was done to help Microsoft capture the growing demand for tech applications, especially AI, in healthcare.
According to Bloomberg, Microsoft is in "advanced" talks to purchase speech technology and AI company Nuance for a price reported as "about $16 billion." The deal could be announced as soon as Monday although Bloomberg News says that the discussions are continuing and a deal could still fall apart. Nuance's voice technology helped Apple launch its Siri voice assistant on the iPhone 4s in 2011 and later that year Nuance acquired QWERTY swiping app Swype.
The price as currently rumored works out to about $56 for each Nuance share. The company's stock closed Friday at $45.64 in after hours trading and at $56 the deal would represent a premium of 22.7%. If done at $16 billion, a purchase of Nuance would be Microsoft's second largest deal of all time after the software giant's $27 billion acquisition of networking app LinkedIn in 2016.
Nuance software including the Dragon line of speech recognition software, is used in a variety of industries from automotive to health care and is used to transcribe voice mails, Doctor's visits and customer service calls. For the fourth quarter the company earned $7 million on revenue of $346 million. For the fiscal year ended last September, Nuance had net income of $91 million on revenue of $1.48 billion after losing $2.17 billion over the previous fiscal year.
Anurag Rana, a Bloomberg Intelligence senior analyst, said, "This can really help Microsoft accelerate the digitization of the health-care industry, which has lagged other sectors such as retail and banking. The biggest near-term benefit that I can see is in the area of telehealth, where Nuance transcription product is currently being used with Microsoft Teams."
Microsoft recently dropped the iOS and Android apps for Cortana, its digital assistant and Siri rival. Not enough iOS and Android users were using the Cortana app for Microsoft to keep it active.As far as Siri's connection with Nuance is concerned, the latter provided Apple's digital assistant with its speech recognition engine.
Nuance helped provide Siri with the technology needed for the assistant to hear tasks requested by users and understand what was being asked. It is unclear what the current relationship is between Apple and Nuance.