Microsoft $20bn deal for Siri creator boosts health blitz

Microsoft is beefing up its artificial intelligence expertise for healthcare companies with the eye-watering $19.7bn (£13.3bn) acquisition of Nuance Communications, the company that help to develop Apple’s Siri speech recognition software.

The deal, which would be second only in value to its $26.2bn (£18.5bn) purchase of LinkedIn in 2016, is designed to tap into the rise of the so-called “telehealth” sector, which has boomed during lockdown as doctor consultations have switched from face to face to online.

Founded in 1992 in Massachusetts, Nuance has more than 1,600 employees globally and operates in 28 countries. The company reported revenues of $1.5bn in its last full financial year but has been bogged down in debt.

Nuance only made $29m in net income last year, after several years of losses, and its revenue has fallen more than a quarter since peaking above $2bn in 2018.

Despite its early foray into speech recognition software, the company has recently focused on providing software to the healthcare industry, enabling the automation of radiology reports and the dictation of doctors’ patient notes. It was this move which saw the two businesses start working together in 2019 to roll out AI systems that help doctors with admin tasks.

Microsoft chief executive Satya Nadella claimed that nearly 80% of US hospitals are already Nuance customers.

He added: “Nuance provides the AI layer at the healthcare point of delivery. AI is technology’s most important priority, and healthcare is its most urgent application.”

Microsoft has agreed to pay $56 per share for the company, a 23% premium on its current share price, giving an equity value of $16bn. The company said the deal, which is expected to be completed later this year, valued Nuance at $19.7bn including net debt.