Microsoft Buys Speech Recognition Company Nuance for $19.7 Billion USD

Microsoft announced Monday it would buy Nuance Communications, a software company that focuses on speech recognition through artificial intelligence, in an all-cash transaction valued at $19.7 billion USD.

Nuance is best known for its Dragon family of speech recognition software, which employs deep learning models to improve its speech transcription accuracy over time.

Microsoft has been investing in industry-specific cloud platforms and Nuance’s acquisition is part of its moves into the rapidly growing digital healthcare industry, especially in light of the on-going Covid-19 pandemic.

“AI is technology’s most important priority, and healthcare is its most urgent application,” said Microsoft CEO Satya Nadella. “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 for Healthcare and Nuance.”

The acquisition also means Microsoft’s cloud computing business, Azure, will support Nuance’s technologies on the backend. For example, one of Nuance’s biggest products is Dragon Medical, speech-recognition software that can transcribe everything a doctor says during a clinical visit. The same product can also save the notes in the cloud on Microsoft Azure, as part of a partnership the two companies struck in 2019.

“Nuance solutions are currently used by more than 55% of physicians and 75% of radiologists in the US, and used in 77% of US hospitals,” Nuance says.

The deal will be the second-biggest acquisition for Microsoft behind its $26 billion USD deal for LinkedIn in 2016. Microsoft expects the deal to close in the calendar year 2021, subject to approval by Nuance’s shareholders, regulatory approvals and other closing conditions.

Once the Nuance deal closes, Microsoft said, Nuance CEO Mark Benjamin will remain head of the company, reporting to Scott Guthrie, Microsoft’s executive VP of cloud and AI.