Microsoft Corp. is making a huge bet on artificial intelligence in healthcare.
The software giant is ready to buy Nuance Communications Inc., by leveraging the company connected with Siri speech technology to review solutions that free physicians from note-taking and better predict a patient’s needs. Microsoft may announce the deal Monday if the talks are successful, according to people familiar with the case.
The price being discussed could value Nuance at around $ 56 a share, a 23% premium by Friday’s close, said one, who asked not to be identified because the information is private. It will since become Microsoft’s largest acquisition LinkedIn Corp. The Nuance purchase would generate a stock value of approximately $ 16 billion, according to data compiled by Bloomberg.
Microsoft has been trying to penetrate healthcare by selling more cloud software to hospitals and doctors. It has partnered with Nuance for two years on AI software that helps clinicians record and integrate patient conversations into electronic health records, and by combining the speech technology company’s products in the Teams chat app for telecare appointments.
The “Nuance deal would be a trophy for Redmond,” said Wedbush analyst Dan Ives, referring to Redmond, Washington-based Microsoft. “Nuance has been in the midst of an unprecedented strategic turnaround in recent years led by CEO Mark Benjamin and we believe the company is a unique healthcare asset for Microsoft.”
Under Benjamin, Nuance has narrowed its focus and separated peripheral companies such as Cerence Inc., the auto AI unit that spun off two years ago. It also sold its imaging division to Thoma Bravo’s Kofax for $ 400 million, focusing instead on partnerships with healthcare providers and the largest electronic health record companies.
A Microsoft representative declined to comment. A Nuance spokesperson, based in Burlington, Massachusetts, did not immediately respond to a request for comment.
Digitizing healthcare
Nuance’s shares are up 3.4% this year, giving the company that laid the foundation for the technology used in Apple Inc.’s Siri, a market value of nearly $ 13 billion. Earnings still lagged the 9.9% jump in the S&P 500 Index Microsoft added 15%.
As AI software gets better at parsing language and predicting medical needs, Nuance and Microsoft may be able to develop technology that searches for specific words in medical records to provide physicians with better suggestions for patient care.
“This can really help Microsoft accelerate the digitization of the healthcare industry, which is lagging behind other industries, such as retail and banking,” said Anurag Rana, senior analyst at Bloomberg Intelligence. “The biggest benefit I can see in the short term is in telecare, where Nuance’s transcription product is currently used with Microsoft Teams.”
Nuance, whose products include Dragon speech recognition software net income of $ 91 million on revenues of $ 1.48 billion for the fiscal year ended September 30, after a loss of $ 217 million the previous year.
Microsoft is also increasingly focused on healthcareIn May, the software maker unveiled a suite of industry-specific cloud software and also hired executives with a medical background and researched machine learning and AI tools for clinical trials, among other things.
Coincidentally, one of Microsoft’s offices in the Boston area is located right next to Nuance’s headquarters.
Still active
With a market value of $ 1.93 trillion, the highest in the world after Apple, Microsoft remains active in deals.
Last month, Bloomberg News reported that the software giant was in talks to acquire Discord Inc., a video game chat community, for more than $ 10 billion. It too purchased video game maker Zenimax Media Inc. for $ 7.5 billion in cash in a deal struck this year.
According to data from Bloomberg, the Nuance purchase would be considered Microsoft’s second largest acquisition, following the 2016 purchase of LinkedIn with a share value of more than $ 26 billion.
Microsoft entered the artificial intelligence space decades ago with research projects and an early focus by co-founder Bill Gates on finding ways to make it easier for people to talk to computers in plain English.
The purchase of Nuance complements efforts in recent years, where Microsoft has assigned thousands of employees to its AI work and released tools that customers can use to build applications that understand and translate speech, recognize images, and detect anomalies. The company sees AI as a key driver for future cloud service sales.
The acquisition could also boost Microsoft as it faces stiff competition in AI, with rivals such as Alphabet Inc.’s Google. and Amazon.com Inc. also invest heavily in the field.