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Microsoft Acquiring Nuance for AI Speech, Healthcare Cloud Technology

Microsoft is acquire artificial intelligence (AI) and Apple Siri speech recognition technology partner Nuance Communications for roughly $19.7 billion billion. The deal pushes Microsoft deeper into the healthcare software market.

This is technology M&A deal number 229 that ChannelE2E has covered so far in 2021. See all technology M&A deals for 2021 and 2020 listed here.

Nuance develops conversational AI and ambient intelligence technology. Key Nuance partners include Apple Siri, which has leveraged Nuance's speech recognition software since at least 2013.

Why Microsoft Is Acquiring Nuance

Roughly 90 percent of U.S. hospitals and 85 percent of the Fortune 100 across the globe leverage the company's software, according to a Nuance financial statement from February 2021.

Nuance is a strategic technology acquisition rather than an instant growth acquisition for Microsoft. Indeed, Nuance's revenue was $345.8 million in Q4 of 2020, down from $361.5 million in Q4 of 2019, the company disclosed in February 2021.

Still, Nuance is expected to bolster Microsoft growth initiatives such as the Microsoft Cloud for Healthcare effort. Moreover, Nuance expertise across Interactive Voice Response (IVR), virtual assistants, and digital and biometric solutions align with Microsoft Azure, Teams, and Dynamics 365, the buyer says.

Microsoft Acquires Nuance Communications: Executive Perspectives

In a prepared statement about the deal, Microsoft CEO Satya Nadella said:

"Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI. AI is technology's most important priority, and healthcare is its most urgent application. Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud in Healthcare and Nuance."

Added Nuance CEO Mark Benjamin:

"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. 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. At the same time, this combination offers a critical opportunity to deliver meaningful and certain value to our shareholders who have driven and supported us on this journey."

Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft. The deal is expected to close in 2021, Microsoft said.

Nuance Communications: History of Dragon Naturally Speaking

Still. Nuance does have some growth-oriented products in its portfolio. They include:

  • Dragon Medical & DAX Cloud revenue, which grew 22% year-over-year driven by the ongoing transition of the company's installed base to Dragon Medical One, as well as traction in international, ambulatory and community hospital markets, the company stated in February  2021.
  • Also, the company's enterprise business delivered "another record revenue quarter," up slightly from its previous record in Q1 of 2020, driven by particularly strong demand for our Security & Biometrics solutions, Nuance said in February 2021.

Some of Nuance's speech technology has been around since the 1990s. The Dragon Speech Recognition Solutions were previously owned by Lernout & Hauspie, a Belgium-based corporation that imploded under alleged financial fraud in November 2020. From there, ScanSoft acquired both Dragon and Nuance, and ultimately rebranded as Nuance around 2005.

Joe Panettieri

Joe Panettieri is co-founder & editorial director of MSSP Alert and ChannelE2E, the two leading news & analysis sites for managed service providers in the cybersecurity market.