Moving aggressively to expand its presence in healthcare, Microsoft has inked a definitive agreement to acquire speech recognition and artificial intelligence (AI) software developer Nuance Communications for $19.7 billion in cash.
For Microsoft, the deal builds on a recent strategy on developing industry-specific cloud-based offerings and follows on the launch of its Microsoft Cloud for Healthcare in 2020. Microsoft and Nuance are also familiar with each other, having partnered since 2019 to incorporate Microsoft's Azure cloud and AI technologies.
Known primarily in radiology for its longstanding and popular PowerScribe speech-recognition software applications, Nuance has emphasized the cloud and AI in recent years. In 2018, it introduced PowerScribe One, a cloud- and AI-based radiology reporting and workflow platform system that's based on Azure.
Nuance's other medical imaging offerings include PowerScribe 360 radiology reporting software, PowerShare image sharing and exchange service, and cloud-based mPower clinical analytics software. What's more, Nuance also hosts its AI Marketplace for Diagnostic Imaging, a marketplace that aims to facilitate adoption of AI by bringing radiologists and developers together.
Outside of radiology, Nuance's other product lines include its cloud-based Dragon Medical speech-recognition and transcription portfolio for clinical documentation; a range of clinical, revenue, and quality management applications; patient engagement tools; as well as optimization and consulting services.
The vendors said that Nuance's software is used by more than 55% of physicians and 75% of radiologists in the U.S., as well as in 77% of U.S. hospitals. Also, Nuance's Healthcare Cloud revenue produced 37% annual revenue growth in its 2020 fiscal year (end-September 2020).
Nuance has streamlined its portfolio over the last three years to focus on the healthcare and enterprise AI markets, and the acquisition will bring the focus and global scale needed to seize this opportunity, according to CEO Mark Benjamin.
In addition to utilizing Nuance's software to augment Microsoft Cloud for Healthcare, Microsoft plans to make use of Nuance's relationships with electronic health record (EHR) providers to expand access to its ambient clinical intelligence technology and other cloud services. If completed, the deal would double Microsoft's total addressable market in the healthcare provider space to nearly $500 billion, according to the company.
The firms also noted that they would "deepen" their existing commitments to their extended partner ecosystem, as well as to the "highest standards" of data privacy, security, and compliance.
Microsoft will pay $56 per share, representing a 23% premium to Nuance's closing share price on Friday. The deal is expected to close this year, subject to Nuance shareholder approval, the satisfaction of certain regulatory approvals, and other customary closing conditions
Microsoft said that Mark Benjamin will continue on as CEO of Nuance. He will report to Scott Guthrie, executive president of cloud and AI at Microsoft.
The company expects Nuance's financials will be reported as part of its Intelligent Cloud segment. The acquisition is expected to be dilutive by less than 1% in the 2022 fiscal year and to be accretive to nongenerally accepted accounting principles earnings per share in the 2023 fiscal year.
