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Microsoft announced Monday that it will acquire artificial intelligence (AI) software developer Nuance Communications for $56 per share, in an all-cash transaction valued at $19.7 billion, including net debt. The deal for Nuance, whose technology was used to help power Apple's Siri voice assistant, comes at a 23% premium to its closing price on April 9 and is expected to be finalised this year.
"Nuance provides the AI layer at the healthcare point of delivery," remarked Microsoft CEO Satya Nadella, adding "we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections."
The deal confirms recent speculation about a potential merger with Nuance, and builds on an existing partnership between the companies. It also signals the latest step in Microsoft's push into healthcare. In May last year, it introduced a package of industry-specific cloud software, and has also hired executives with medical backgrounds and been researching machine learning and AI tools for areas including clinical trials. "By augmenting the Microsoft Cloud for Healthcare with Nuance's solutions, as well as the benefit of Nuance's expertise and relationships with EHR (electronic health record) systems providers, [we] will be better able to empower healthcare providers through the power of ambient clinical intelligence and other…cloud services," Microsoft said.
Nuance provides conversational AI and cloud-based ambient clinical intelligence for healthcare professionals via its clinical speech recognition software-as-service offerings built on Microsoft's Azure cloud computing service. Nuance's products include the Dragon Ambient eXperience (DAX), Dragon Medical One and PowerScribe One for radiology reporting. According to Microsoft, these work "seamlessly with core healthcare systems," including EHRs. It added that in the US, Nuance's solutions are used by more than 55% of physicians and 75% of radiologists, as well as in 77% of hospitals across the country. Moreover, Nuance saw its healthcare cloud revenue jump 37% in fiscal 2020, compared to its prior fiscal year.
Under the acquisition agreement, which has been unanimously approved by the boards of both companies, Mark Benjamin will remain CEO of Nuance, reporting to Scott Guthrie, executive vice president of Cloud & AI at Microsoft. Upon closing, Nuance's financial results will be included as part of Microsoft's intelligent cloud unit.
Commenting on the deal, Wedbush Securities analyst Dan Ives said that given the widespread adoption of AI technology in medical settings, DAX alone could be worth $3 billion to $4 billion. He called the buy-out a "strategic no-brainer," and suggested that it "is the right acquisition at the right time, with Microsoft doubling down on its healthcare initiatives over the coming years."
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