Microsoft has announced that it is acquiring speech to text software giant and a key player in the healthcare domain-Nuance Communications for a massive $19.7 billion.
The fun part? Well, Nuance’s numbers are declining. The company reported $352.9 million in revenue compared to $387.6 million in the same period a year prior, and while that is still an impressive run rate of $1.4 billion, a graph on the negative y axis is not something a company wants to plot. However, Microsoft is one of the few entities on the planet that can look past numbers.
Spending almost $20 billion on any acquisition is no menial task, even for Microsoft. However, the company has long term goals that it aims to fulfill with Nuance’s help. Over the last year, healthcare has changed, and many people in 2021 would rather talk to a doctor online than go for a physical.
This is a culture defining change, and Microsoft is planning to capitalize on it. While it has speech to text products and chatbots of its own, Nuance is the market leader, and being the top dog in a newly emerging market is exactly the position the Satya Nadella led company wants to be in.
In the words of Microsoft itself, “Nuance is a trusted cloud and AI software leader representing decades of accumulated healthcare and enterprise AI experience.” This will help the company elevate itself to the top of the food chain instantaneously, and while $20 billion is a huge price to pay, Microsoft has deep pockets.
Nuance operates products like the Dragon Ambient eXperience, Dragon Medical One and PowerScribe One for radiology reporting, all leading clinical speech recognition SaaS offerings built on Microsoft Azure. The company’s solutions are currently used by more than 55% of physicians and 75% of radiologists in the U.S., and used in 77% of U.S. hospitals.
“The acquisition will double Microsoft’s total addressable market (TAM) in the healthcare provider space, bringing the company’s TAM in healthcare to nearly $500 billion. Nuance and Microsoft will deepen their existing commitments to the extended partner ecosystem, as well as the highest standards of data privacy, security and compliance,” Microsoft said.
Moreover, Nuance is also a key player in providing customer engagement solutions across Interactive Voice Response (IVR), virtual assistants, and digital and biometric solutions worldwide. Microsoft says that this will complement its cloud, including Azure, Teams, and Dynamics 365, to deliver next-generation customer engagement and security solutions.
Nonetheless, Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft.
“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,” said Mark Benjamin, CEO, Nuance. “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.”