Microsoft mentioned on Monday that it will buy Nuance Communications, a supplier of artificial-intelligence and speech-recognition software program, for about $16 billion, because it pushes to develop its well being care know-how companies.

In buying Nuance, whose merchandise embody the transcription software Dragon, Microsoft is hoping to bolster its choices for the fast-growing area of medical computing. Nuance has a longtime set of shoppers in addition to a wide selection of speech and textual content information associated to well being care, which is usually a significant a part of constructing new techniques.

Microsoft and Nuance have been working collectively since 2019, however the acquisition indicators that Microsoft has greater ambitions for Nuance’s know-how. Microsoft has been making giant investments in industry-specific cloud know-how, together with well being care, finance and retail.

Microsoft mentioned the acquisition would double the dimensions of the well being care market the place it competed, to nearly $500 billion.

The deal is Microsoft’s greatest takeover since its 2015 acquisition of LinkedIn for $26.2 billion.

“Nuance provides the A.I. layer at the health care point of delivery and is a pioneer in the real-world application of enterprise A.I.,” Satya Nadella, Microsoft’s chief government, mentioned in a press release.

When Microsoft buys an organization, its executives usually consider they will do extra with the know-how than the corporate it’s shopping for can, a mannequin that matches the Nuance deal, mentioned Brad Reback, an analyst on the funding financial institution Stifel. That Nuance has proved itself in well being care, with its technical and complicated vocabulary, means Microsoft may introduce different sorts of companies.

“Being able to solve that problem makes it that much easier to handle other industries’ terminology,” Mr. Reback mentioned.

Nuance’s instruments are additionally used principally within the United States, so promoting to a world powerhouse like Microsoft will let the corporate far more shortly promote internationally. “We saw the opportunity to superscale how we change an industry,” Mark Benjamin, Nuance’s chief government, mentioned in an interview.

Microsoft’s worthwhile enterprise means it has cash to spend. It ended 2020 with $132 billion in money and has been wanting for massive offers to put that cash to use. It introduced a deal in September to spend $7.5 billion on ZeniMax Media, the guardian firm of gaming studios that make main titles like Doom and Quake.

But different potential acquisitions haven’t all the time panned out. Last 12 months, a blockbuster bid to buy TikTok, the viral social community, turned into a political soap opera and fell aside. Microsoft has also looked at buying Discord, a stay chat group largely utilized by avid gamers, although the standing of these talks is unclear.

Under the phrases of the deal, Microsoft pays $56 a share in money, up 23 p.c from Nuance’s closing worth on Friday — a complete of about $16 billion. Including assumed debt, the transaction values Nuance at about $19.7 billion.

Nuance was a pioneer in speech recognition. It led the market within the 1990s and 2000s and supplied a part of the underlying know-how for Siri, the speaking digital assistant that made its debut on the Apple iPhone in 2011. Licensing know-how to Apple and different corporations was a key a part of its enterprise.

Li Deng, who helped lead speech recognition analysis at Microsoft for almost twenty years, mentioned in an e-mail interview that he urged his bosses to purchase Nuance in 1999 however that Microsoft balked, feeling the worth was too excessive.

Speech recognition underwent a sea change in 2010, when a group of researchers at a Microsoft analysis lab outdoors Seattle constructed a brand new form of speech recognition system utilizing a technique referred to as “deep learning.” This methodology — which was far more practical than earlier applied sciences — quickly unfold throughout the {industry}, with corporations like Microsoft, Google and IBM rising to the fore.

This is the know-how that now permits Siri, the Google Assistant and different digital assistants to acknowledge spoken phrases with near-human-level accuracy. Companies like Microsoft and Google additionally promote the know-how to different corporations by what are referred to as cloud computing companies.

After this shift, Nuance revamped its personal enterprise, providing speech recognition and different applied sciences for particular markets, most notably well being care.

During a convention name with traders, Mr. Benjamin, the Nuance chief government, who will stay within the position after the acquisition, mentioned that his firm’s well being care enterprise had grown 37 p.c over the previous 12 months and that he anticipated extra development. Microsoft mentioned Nuance know-how was utilized by greater than 55 p.c of physicians and 75 p.c of radiologists within the United States and in 77 p.c of hospitals within the nation.

“The deal gives Microsoft access to half a million doctors and some of the largest hospitals around the world,” mentioned Dan Ives, managing director of fairness analysis with Wedbush Securities.



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