(Bloomberg) — Microsoft Corp. is shopping for speech-recognition pioneer Nuance Communications Inc. in an all-cash deal valued at $19.6 billion, gaining artificial-intelligence know-how aimed toward serving to medical doctors predict sufferers’ wants and upgrading hospitals’ digital record-keeping.
The software program big is providing to buy Nuance at $56 a share, a 23% premium to Friday’s shut, in accordance to an announcement Monday, which confirmed an earlier Bloomberg report. The deal marks Microsoft’s largest acquisition since LinkedIn Corp.
The transaction worth is derived by the $56 a share multiplied by about 350 million absolutely diluted shares of Nuance, together with inventory choices and inventory awards. The acquisition will lower earnings by lower than 1% in the yr that begins July 1 and begin to add to revenue the next yr, Microsoft mentioned.
Microsoft is tapping the corporate tied to the Siri voice know-how to develop options that free medical doctors from note-taking and higher decide health-care wants. It has been working with Nuance for two years on AI software program that helps clinicians seize affected person discussions and combine them into digital well being data, and mixing the speech know-how firm’s merchandise into its Teams chat app for telehealth appointments.
“The Nuance deal is a strategic no-brainer,” Wedbush Securities analyst Dan Ives wrote in a observe Monday. It “fits like a glove into its health-care endeavors at a time in which hospitals and doctors are embracing next-generation AI capabilities,” Ives mentioned, additionally praising Nuance Chief Executive Officer Mark Benjamin for main a turnaround that has made his firm a “unique asset” for Microsoft.
Under Benjamin, Nuance has narrowed its focus and separated peripheral companies, equivalent to Cerence Inc., the automotive AI unit that was spun off two years in the past. It additionally offered its imaging division to Thoma Bravo’s Kofax for $400 million, and zoomed in as a substitute on partnerships with health-care suppliers and the most important digital medical data corporations.
Although the businesses have partnered for two years, “together we can really bend the curve around health care – really improve the health outcomes and reduce costs,” Microsoft CEO Satya Nadella mentioned in an interview. “Every provider, that’s what they want coming out of this pandemic, they want to look for a trusted partner, in this case the combination of Nuance and Microsoft, to help them.”
Microsoft has been attempting to make inroads into the health-care sector, promoting extra cloud software program to hospitals and medical doctors. As AI software program will get higher at parsing language and predicting medical wants, Nuance and Microsoft could give you the chance to develop know-how that searches for sure phrases in well being data to make higher strategies to medical doctors for affected person care. The acquisition is probably going to deepen competitors between Microsoft and Amazon.com Inc. The retail big in latest years has pushed to promote its cloud-computing providers and Alexa voice software program to health-care corporations. And Amazon and Alphabet Inc.’s Google are each additionally investing closely in the sector of synthetic intelligence.
As of Friday, Nuance’s shares had climbed 3.4% this yr, giving the corporate that laid the groundwork for the know-how used in Apple Inc.’s Siri a market worth of virtually $13 billion. The acquire nonetheless trailed the 9.9% bounce in the S&P 500 Index, whereas Microsoft added 15%. Microsoft shares have been little modified Monday in New York, and Nuance rose 17%.
Microsoft expects the deal to shut this calendar yr, and Nuance’s Benjamin will be a part of Microsoft, retaining the CEO title and reporting to Microsoft cloud chief Scott Guthrie. Nuance’s monetary outcomes might be included as a part of Microsoft’s clever cloud unit.
Nuance, whose merchandise embody Dragon speech-recognition software program, had web revenue of $91 million on income of $1.48 billion for its fiscal yr ending Sept. 30., after dropping $217 million the earlier yr.
Nuance already has partnerships with massive digital medical data corporations like Epic Systems Corp. and Cerner Corp., and Microsoft plans to proceed these, Nadella mentioned. The aim is “absolutely not” to attempt to exchange these corporations, he mentioned. “If anything we want to double down on our partnership with Epic and Cerner.”
Nuance and Microsoft additionally plan to supply the Dragon Ambient Experience software program, used to ease how clinicians doc affected person care, in different industries the place AI instruments to flip speech into data could be helpful, Benjamin mentioned.
Microsoft has additionally been more and more centered on well being care. In May, the software program maker unveiled a package deal of industry-specific cloud software program, and has additionally employed executives with medical backgrounds and researching machine studying and AI instruments for areas together with medical trials.
“The more we worked together, the more we realized that we’re solving some of the greatest, most challenging and complex scenarios and speed matters,” Benjamin mentioned in an interview.
Coincidentally, one among Microsoft’s Boston-area places of work is situated proper subsequent to Nuance’s headquarters.
Still Active
With a market worth of $1.93 trillion, probably the most in the world after Apple, Microsoft stays energetic on the offers entrance.
Last month, Bloomberg News reported that the software program big was in talks to purchase Discord Inc., a video-game chat neighborhood, for greater than $10 billion. It additionally purchased video-game maker Zenimax Media Inc. for $7.5 billion in money in a deal that closed this yr.
The Nuance deal would rank as Microsoft’s second-largest acquisition, behind the 2016 LinkedIn buy at an fairness worth of greater than $26 billion, in accordance to knowledge compiled by Bloomberg. The firm, which had greater than $130 billion in money and short-term investments on the shut of final yr, mentioned it is going to proceed its inventory buyback program, regardless of spending money on Nuance.
Microsoft entered the bogus intelligence house a long time in the past with analysis tasks and an early focus by co-founder Bill Gates on discovering methods to make it simpler for individuals to communicate to computer systems utilizing plain English.
The Nuance buy will complement efforts in latest years, the place Microsoft has assigned 1000’s of staff to its AI work and launched instruments prospects can use to construct functions that perceive and translate speech, acknowledge pictures and detect anomalies. The firm views AI as a key driver of future gross sales of cloud providers.
(Updates with analyst’s remark in fifth paragraph.)
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