Microsoft is eyeing up voice tech pioneer Nuance Communications for a reported $16 billion in a bid to help it expand further into the AI space.
On Sunday, news emerged that Microsoft (NASDAQ: MSFT) is in advanced discussions to buy speech-recognition company Nuance Communications. The deal is expected to be announced today.
The purchase is part of the tech giant’s wider plan to expand its business empire through acquisitions. In 2020, Microsoft made it known that it wanted to buy video-sharing app TikTok, while the company has also tried to acquire social media platforms Pinterest and Discord over the last 12 months. In addition, just last month, Microsoft struck a deal to buy video game maker Zenimax for $7.5 billion.
What is Nuance?
Nuance is a software technology company that provides speech recognition and artificial intelligence for sectors ranging from healthcare to the automotive industries. The AI firm makes money from selling tools that recognize and transcribe speech. These services have proven useful in doctor’s visits, customer-service calls, voicemails, taking general notes, and many other scenarios. The Massachusetts-based company’s voice recognition technology also helped launch Apple’s digital assistant Siri.
After acquiring a number of smaller companies, Nuance has tried to strip back its business to allow it to refocus on certain markets in order to rekindle growth.
Nuance currently has a market cap of around $13 billion. The company reported $7 million in net income on roughly $346 million in revenue in the fourth quarter, down 4% year-over-year. Nuance’s revenue shrank in both of the last two years and, during that time, it has sold a number of its business units to rebuild its cloud-based systems for hospitals and doctors. However, more healthcare practitioners using the technology has resulted in a rebound in Nuance’s share price which has more than tripled since hitting a low point last March.
Terms of the deal
According to reports, Microsoft made contact with Nuance in December about buying the company and is apparently ready to pay around $56 per share. This price would give Nuance an equity value of $16 billion, up 23% from the company’s $45.58 per share as of market close on Friday. If Microsoft does buy Nuance for the specified amount, it would be the software leader’s second-largest acquisition to date, behind the $27 billion LinkedIn deal in 2016.
With the deal, Microsoft will be able to expand its voice software functions by allowing the company to better serve its large corporation and government clients. The tech giant already has tools that developers can use to allow applications to transcribe speech into words, and these functions appear on the Bing search engine and the Teams communications app, but with Nuance, the company will be able to offer an advanced product.
Microsoft and Nuance have both not yet commented on the deal.
A MyWallSt subscription gives you access to over 100 market-beating stock picks and the research to back them up. Our analyst team post daily insights, subscriber-only podcasts and the headlines that move the market. Get your free access now!
MyWallSt operates a full disclosure policy. MyWallSt staff currently holds long positions in companies mentioned above. Read our full disclosure policy here.