Earlier today, Microsoft announced its plans to buy Nuance at $ 56 a share – 23 percent above last Friday’s closing price of Nuance. The deal equates to a cash outlay of $ 16 billion and a total valuation for Nuance of approximately $ 19.7 billion, including the company’s acquired debt.
Who is Nuance?
Nuance is a well-known player in the field of natural language recognition. The company’s technology is at the heart of Apple’s personal Siri assistant. Nuance also sells well-known personal speech recognition software Dragon NaturallySpeaking, which is invaluable to many people with a wide variety of physical disabilities.
Originally released in 1997, Dragon NaturallySpeaking was one of the first commercially available continuous dictation products – software that didn’t require the user to pause briefly between words. In 2000, Dragon Systems was acquired by ScanSoft, which acquired Nuance Communications in 2005 and rebranded itself as Nuance.
Previous versions of Dragon software used hidden Markov models to figure out the meaning of human speech, but this method had serious limitations compared to modern AI algorithms. In 2009, Stanford researcher Fei-Fei Li created ImageNet – a huge set of training data that sparked massive growth in deep learning algorithms used for modern AI technology.
After Microsoft researchers Dong Yu and Frank Seide successfully applied deep learning techniques to real-time automatic speech recognition in 2010, Dragon – now Nuance – applied the same techniques to its own speech recognition software.
Fast forward to today, and according to both Microsoft and Nuance, medically-focused versions of Dragon are used by 77 percent of hospitals, 75 percent of radiologists, and 55 percent of doctors in the United States.
Microsoft’s acquisition game
Microsoft and Nuance partnered in 2019 to provide ambient clinical intelligence (ACI) technologies to healthcare providers. ACI technology aims to reduce physician burnout and increase efficiency by transferring administrative tasks to computers. (A 2017 study published in the Annals of Family Medicine found that physicians typically spend two hours tracking records for every hour of actual patient care.)
By acquiring Nuance, Microsoft will gain direct access to the company’s entire healthcare customer list. It also gives Microsoft the opportunity to push Nuance technology – currently mainly used in the US – to Microsoft’s large international market. Nuance CEO Mark Benjamin, who will continue to lead Nuance as a Microsoft division after the acquisition, describes it as an opportunity to “see the way we change an industry on a larger scale.”
The move doubles Microsoft’s total addressable vertical healthcare market to nearly $ 500 billion. It also combines what Microsoft CEO Satya Nadella describes as “the AI layer at the point of concern of delivery” with Microsoft’s own massive cloud infrastructure, including Azure, Teams and Dynamics 365.
The acquisition has been unanimously approved by the boards of both Nuance and Microsoft and is expected to be completed by the end of 2021.