Earlier today, Microsoft announced its plans to buy Nuance for $ 56 a share – 23 percent above Nuance’s closing price last Friday. The agreement amounts to a cash amount of $ 16 billion and a total valuation for Nuance of approximately $ 19.7 billion, including the company’s assumed 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 assistant at Siri. Nuance also sells well-known personal speech recognition software Dragon NaturallySpeaking, which is invaluable to many people with a wide range of physical disabilities.
Dragon NaturallySpeaking, originally released in 1997, was one of the first commercial continuous dictation products, meaning it is software that does not require the user to pause briefly between words. In 2000, Dragon Systems was acquired by ScanSoft, which acquired Nuance Communications in 2005 and renamed itself as Nuance.
Earlier 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 created Li ImageNet – a massive training dataset that created a boom in deep algorithms used for modern, core AI technology.
After Microsoft researchers Dong Yu and Frank Seide successfully applied deep-learning techniques to real-time automated 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-oriented versions of Dragon are in use by 77 percent of hospitals, 75 percent of radiologists, and 55 percent of physicians in the United States.
Microsoft’s acquisition game
Microsoft and Nuance began a partnership in 2019 to deliver environmental clinical intelligence (ACI) technologies to healthcare providers. ACI technology is intended to reduce the burnout of physicians and increase efficiency by downloading administrative tasks to computers. (A 2017 study, published in the Annals of Family Medicine, documented physicians typically spend two hours keeping records for every hour of actual patient care.)
The acquisition of Nuance gives Microsoft direct access to the entire list of the company’s healthcare customers. It also offers Microsoft the opportunity to push Nuance technology – which is currently mostly used in the US – to Microsoft’s own large international market. Nuance CEO Mark Benjamin – who will continue to manage Nuance as a Microsoft division after the acquisition – describes it as an opportunity to “increase the better we change an industry.”
The move doubles Microsoft’s total addressable market in vertical healthcare to nearly $ 500 billion. It also ties in with what Microsoft CEO Satya Nadella describes as ‘the AI layer at the health point of delivery’ with Microsoft’s own massive cloud infrastructure, including Azure, Teams and Dynamics 365.
The acquisition was unanimously approved by the boards of both Nuance and Microsoft and is expected to close by the end of 2021.