Microsoft Focuses On Healthcare With $20bn AI Buy

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Microsoft’s purchase of speech recognition pioneer Nuance Communications gives it leading cloud AI tools that are widely used in healthcare industry

Microsoft has said it is aiming to expand its presence in the healthcare industry with its acquisition of speech recognition pioneer Nuance Communications.

The $19.7 billion (£13.3bn) deal, announced on Monday, is Microsoft’s second-largest to date after its purchase of LinkedIn in 2016 for £18.5bn.

Nuance Communications was founded in 1992 and is known for having helped develop Apple’s Siri.

It has built up a strong presence in the health industry, with its software used by 77 percent of US hospitals.

Satya Nadella, CEO, Microsoft.
Microsoft chief executive Satya Nadella

Healthcare focus

The company makes a number of popular clinical speech-recognition tools used by physicians and radiologists to automate the process of generating clinical documentation.

In the US, more than half of physicians and 75 percent of radiologists use the tools.

Nuance’s Healthcare Cloud revenue saw 37 percent growth year-on-year for its most recent fiscal year, ended September 2020.

Microsoft has focused aggressively on building out its cloud business in recent years, including a focus on industry-specific cloud tools.

As part of that drive the company formed a deal with Nuance in 2019 that links Nuance’s tools to Microsoft Cloud for Healthcare.

Real-world applications

Microsoft said the Nuance acquisition would give it a much stronger presence in the health industry.

“Nuance provides the AI layer at the healthcare point of delivery and is a pioneer in the real-world application of enterprise AI,” said Microsoft chief executive Satya Nadella in a statement.

He called AI technology’s “most important priority”, with healthcare its “most urgent application”.

Nuance also provides technology for interactive voice-response systems, virtual assistants and digital and biometric systems to multiple industries.

The company said joining Microsoft would boost its businesses by giving it access to Microsoft’s cloud infrastructure and existing customer base.

Intelligent Cloud

Nuance chief executive Mark Benjamin said Microsoft will give the company access to “intelligent cloud-based services at scale”.

Benjamin is to remain head of the company, reporting to Scott Guthrie, Microsoft’s executive vice president of Cloud and AI, while Nuance is to join Microsoft’s Intelligent Cloud division.

Microsoft is paying $56 per share, a 23 percent premium over Nuance’s closing price on Friday, in an all-cash transaction.

The company expects the deal to close by the end of this year.