April 15, 2021

Microsoft buys speech recognition company Nuance in $16B deal, second biggest since LinkedIn

Microsoft announced Monday that it will buy speech recognition company Nuance Communications for $16 billion,…

Microsoft announced Monday that it will buy speech recognition company Nuance Communications for $16 billion, the tech giant’s largest acquisition since it bought LinkedIn for more than $26 billion in 2016.

The deal is the latest sign Microsoft is hunting for more growth through acquisitions. The company is also reportedly in talks to buy the chat app Discord for about $10 billion and last year tried to buy TikTok’s U.S. business for about $30 billion before the deal was derailed. Last month, Microsoft acquired gaming company Zenimax for $7.6 billion.

Shares of Nuance were up nearly 23 percent in premarket trading Monday, representing approximately the same premium Microsoft plans to pay based on the closing price Friday. Trading was halted on the stock after that pop and are expected to resume trading around 9 a.m. ET. Microsoft shares were slightly negative.

Nuance sells tools for recognizing and transcribing speech in doctor’s visits, customer-service calls and voicemails.

Nuance would be aligned with the part of Microsoft’s business that serves businesses and governments. Nuance derives revenue by selling tools for recognizing and transcribing speech in doctor’s visits, customer-service calls and voicemails. In its announcement Monday, Microsoft said Nuance’s technology will be used to augment Microsoft’s cloud products for health care, which were launched last year.

The company reported $7 million in net income on about $346 million in revenue in the fourth quarter of 2020, with revenue declining 4 percent on an annualized basis. Nuance was founded in 1992, and had 7,100 employees as of September 2020.

Microsoft said Nuance’s CEO Mark Benjamin will remain at the company and report to Scott Guthrie, the Microsoft executive in charge of the company’s cloud and artificial intelligence businesses.

Nuance has a strong reputation for its voice recognition technology, and it has been considered an acquisition target for companies like Apple, Microsoft and more for several years. Microsoft has voice recognition built into many of its products already, but it has recently shut down some products featuring its voice assistant Cortana.