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Microsoft buys AI speech tech company Nuance for $19.7 billion

Microsoft buys AI speech tech company Nuance for $19.7 billion


It’s Microsoft’s second-biggest acquisition since buying LinkedIn

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Microsoft is buying AI speech tech firm Nuance for $19.7 billion, bolstering the Redmond, Washington-based tech giant’s prowess in voice recognition and giving it further leverage in the health care market, where Nuance sells many products. Microsoft will pay $56 per share for Nuance, a 23 percent premium over the company’s closing price last Friday. The deal includes Nuance’s net debt.

Nuance is best known for its Dragon software, which uses deep learning to transcribe speech and improves its accuracy over time by adapting to a user’s voice. Nuance has licensed this tech for many services and applications, including, most famously, Apple’s digital assistant Siri. (Though to what degree Siri currently relies on Dragon to answer users’ queries is unclear.) Dragon is an industry leader in terms of transcription accuracy.

The $19.7 billion acquisition of Nuance is Microsoft’s second-largest behind its purchase of LinkedIn in 2016 for $26 billion. It comes at a time when speech tech is improving rapidly, thanks to the deep learning boom in AI, and there are simultaneously more opportunities for its use.

Digital transcription has improved rapidly in recent years, thanks to advances in AI

Digital transcription has become more reliable in a range of settings, from medical consultations to board meetings and university lectures. The uptick in remote work has also created new opportunities. With so many meetings taking place via video, it is easier to offer customers transcriptions via software integrated directly into these calls. Zoom, for example, offers automatic transcription via integration with third-party services like Otter.

For Microsoft, which makes roughly two-thirds of its revenue from enterprise software sales and cloud computing, improving its transcription services for scenarios like these makes complete sense. The company could integrate Nuance’s technology into its existing software, like Teams, or offer it independently as part of its Azure cloud business.

The immediate focus, though, will be on health care, where the two companies have already worked together. In 2019, they announced a “strategic partnership” to use Nuance’s software to digitize health records for Microsoft’s clients. Nuance’s health tech, including its Dragon Medical One platform, which is tuned to identify medical terminology, is reportedly used by more than half a million physicians worldwide and in 77 percent of US hospitals.

“By augmenting the Microsoft Cloud for Healthcare with Nuance’s solutions, as well as the benefit of Nuance’s expertise and relationships with EHR systems providers, Microsoft will be better able to empower healthcare providers through the power of ambient clinical intelligence and other Microsoft cloud services,” said Microsoft in a blog post.

“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” said Microsoft CEO Satya Nadella in a statement. “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.”

News of the Nuance acquisition was first reported over the weekend by Bloomberg, and it’s the latest example of Microsoft’s purchasing spree. Last month, the company completed its $7.5 billion acquisition of games company ZeniMax. Last year, it was considering an acquisition of social video app TikTok, and the company is also reportedly in “exclusive talks” to purchase communications app Discord.