Microsoft is close to acquiring Nuance for $16 billion – Updated

Microsoft is reported to be in advanced talks to buy speech recognition company Nuance Communications for $16 billion, which would be Microsoft’s second largest acquisition ever.

First reported by Bloomberg, which cited its sources “familiar with the matter”, the Redmond-based software giant is believed to be close to acquiring AI firm Nuance Communications, known for its speech recognition technologies. At the proposed price of $56 per share, or $16 billion in total value, this could become the biggest acquisition in Microsoft’s history second only to the $26 billion it paid to buy LinkedIn back in 2016.

Nuance has been a leader in speech recognition technologies though often operates under the hood. It provided the speech recognition engine to Apple’s Siri and powered the voice UI of Ford’s SYNC, Ford’s preinstalled in-car communication and entertainment system. SYNC was also one of the first cases when Nuance technology was incorporated in a Microsoft package.

More recently, shortly before the COVID-19 pandemic onslaught, the two companies started collaborating “to help transform healthcare delivery” especially in documentation in hospital exam rooms. Pairing Nuance’s healthcare-optimised speech recognition and processing solutions with Microsoft’s Azure and natural language processing technologies, the two companies aimed to maximise the time physicians spend with patients while “clinical documentation writes itself.”

Nuance has had its ups and downs over the years and has recently refocused its resources on medical care domains. The company experienced a fast growth phase in the 2010s, including acquiring its competitor Vlingo (which powered voice UI for Symbian), peaking at $2 billion revenues in 2018. But by last year the size of its business has declined by over a quarter. The company reported $29 million net income in 2020 after two loss-making years. The speculated acquisition would not only be a welcome news to Nuance’s shareholders, with 23% premium over Friday’s closing price, but also a chance to take the ongoing collaborations between the two companies to a much bigger scale.

Microsoft has been on a shopping spree in recent years, bolstered by its strong balance sheet. After the LinkedIn deal it has acquired code-sharing community GitHub for $7.5 billion, flirted with the idea of buying TikTok, and spent another $7.5 billion to acquire private gaming company ZeniMax, to name but a few high-profile deals. Late in March there surfaced reports that Microsoft was in talk to purchase videogame-focused messaging platform Discord for over $10 billion.

Neither Microsoft nor Nuance has commented on the reported acquisition and, according Bloomberg’s source, the deal could still fall apart.

Update 12 April 2021 14:00 BST:

Microsoft formally announced the deal after publication “in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt.”