Microsoft Buys a Speech Recognition Tech Company for $16 Billion

by Kay Lee

Microsoft has purchased Nuance Communications, the company whose development of speech recognition technology formed the basis of Apple's Siri voice assistant. The acquisition cost was $16 billion.

As part of the deal, the software giant will pay $56 for each Nuance Communications share, 23% up over Friday's closing price. The deal marks Microsoft's second-largest acquisition under the leadership of Satya Nadella, following the acquisition of LinkedIn in 2016 for $26 billion.

Nuance Communications is headquartered in Burlington, Massachusetts. The company has become a pioneer in speech recognition and artificial intelligence technologies. Before Apple switched to its own technology, Nuance technologies formed the basis of the Siri voice assistant. The company studied the possibility of a sale back in 2014, with Samsung Electronics Co. and private equity firms as the most likely buyers.

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Nuance has spent years building its language processing engine to understand medical terminology. According to the CEO of Microsoft, the deal reflects the growing demand for technical healthcare applications, in particular for the use of artificial intelligence.

Nuance Communications partners with organizations in the healthcare, finance, and other industries, many of which also use Microsoft products, so the Nuance Communications acquisition will enable Microsoft to expand its customer base in these industries. In 2019, both companies announced a collaboration to develop voice assistants for medicine.

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Microsoft and Nuance Communications had further strengthened their relationship during the COVID-19 pandemic, when demand for telemedicine services skyrocketed, by integrating Nuance technologies into Microsoft Teams.

The companies will close the deal before the end of the year following Nuance shareholders and regulators' approval.

Microsoft has been actively buying up companies in recent years to expand and grow its business. In particular, in 2018, it acquired the GitHub web service for $7.5 billion, and six months ago, Microsoft acquired ZeniMax, which develops computer games, for the same amount.

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Since the beginning of this year, Microsoft's capitalization has increased by 15%, over the past twelve months – by 55%. Nuance's market value has risen by 3.4% and 168%, respectively, and is now about $13 billion.