The Microsoft Nuance deal

Last week Microsoft announced it will acquire AI solutions company Nuance Communications for $19.7 billion. Nuance was a pioneer in speech recognition technology with its Dragon software which was famously used to power early versions of Apple’s Siri. Dragon is used by 70% of US hospitals, 75% of radiologists and 80% of Fortune 100 companies.

The acquisition will build on a partnership between the two companies, established 18 months ago. This excerpt from one of our daily emails in October 2019 outlines their objectives:

“Microsoft is partnering with Nuance Communications to build the medical examination room of the future. The partnership will focus on creating what the duo are calling “ambient clinical intelligence” allowing doctors to focus on the patient rather than entering data into a computer. The technology will transcribe patient-doctor conversations extracting important information and entering it into the patient’s electronic health record. It will also allow doctors to see test results or prescribe medicines using voice commands. Studies have shown doctors spend two hours on administrative tasks for every hour they spend in direct patient contact so there is significant room for both productivity and clinical improvements.”

In a conference call following the announcement, Microsoft CEO Satya Nadella highlighted three “areas of momentum” from the acquisition:

Ambient clinical intelligence (ACI)

Nuance’s current ACI product, known as Dragon Ambient Experience (DAX), has seen rapid growth in healthcare. Microsoft predicts ACI will be “…one of the fastest growing infrastructure revenue streams in history”.

Healthcare cloud

Nuance has been actively moving its customers to the cloud where it can better leverage the power of AI to create self-improving systems (speech recognition that gets better over time). This correlates with Microsoft’s launch of vertical industry cloud offerings including a healthcare cloud which we previously wrote about here.

Cross-industry enterprise AI

Microsoft sees potential to utilise Nuance’s AI technology in new industries and products including customer engagement and biometrics security. Microsoft could leverage its global sales force and partner network to grow sales and accelerate the speed of adoption of the new products.

We believe Nuance is a strong strategic fit with Microsoft’s goals. The deal is expected to close at the end of this calendar year pending regulatory and shareholder approval.