Microsoft in Talks to Buy AI Firm Nuance Communications

by BLOOMBERG

Microsoft Corp. is in advanced talks to buy artificial intelligence and speech technology company Nuance Communications Inc., according to people familiar with the matter.

The price being discussed could value Nuance at about $56 a share, though the terms may still change, one of the people said. That would give Nuance an equity value of about $16 billion, according to data compiled by Bloomberg. The price would be a 23% premium to Friday’s close.

An agreement could be announced as soon as this week, said the people, who asked not to be identified because the information is private. Talks are ongoing and the discussions could still fall apart.

A representative for Microsoft declined to comment. A spokesperson for Nuance, based in Burlington, Massachusetts, didn’t immediately respond to a request for comment.

Nuance’s shares have climbed 3.4% this year, giving the company, which laid the groundwork for the technology used in Apple Inc.’s Siri voice software, an almost $13 billion market value but still trailing the 9.9% jump in the S&P 500 Index. Microsoft has climbed 15%.

Nuance Collaboration

Microsoft and Nuance have collaborated since 2019 on technologies to do things like allow doctors to capture voice conversations from patient visits and enter the data into electronic medical records.

“This can really help Microsoft accelerate the digitization of the health-care industry, which has lagged other sectors such as retail and banking,” said Anurag Rana, a Bloomberg Intelligence senior analyst. “The biggest near-term benefit that I can see is in the area of telehealth, where Nuance transcription product is currently being used with Microsoft Teams.”

Nuance, whose products include Dragon speech-recognition software, had net income of $91 million on revenue of $1.48 billion for its fiscal year ending Sept. 30., after losing $217 million the previous year.

Microsoft, with a market value of $1.93 trillion, remains active on the deals front.

Discord, Zenimax

Last month, Bloomberg News reported that the software giant was in talks to acquire Discord Inc., a video-game chat community, for more than $10 billion. It also bought video-game maker Zenimax Media Inc. for $7.5 billion in cash in a deal that closed this year.

A deal for Nuance would rank as Microsoft’s second-largest acquisition, behind only the $24 billion LinkedIn Corp. transaction in 2016, according to data compiled by Bloomberg.

Microsoft entered the artificial intelligence space decades ago with research projects and an early focus by co-founder Bill Gates on finding ways to make it easier for people to speak to computers using plain English.

In recent years, the company has assigned thousands of employees to its artificial intelligence work and released tools customers can use to build applications that understand and translate speech, recognize images and detect anomalies. The company views AI as a key driver of future sales of cloud services.

Microsoft faces fierce competition in the space with rivals such as Alphabet Inc.’s Google and Amazon.com Inc. also investing heavily in the field.