In a bold acquisition that could solidify Microsoft’s growing influence in the health care industry, the tech company agreed to buy artificial intelligence developer Nuance in a deal worth $16 billion, excluding debt.
Nuance is a leader in healthcare artificial intelligence. Paired with the Microsoft Cloud for Healthcare, introduced in 2020, Microsoft could make a big push into the health care software business.
The deal represents the second-largest acquisition by Microsoft, behind LinkedIn. Microsoft purchased LinkedIn in 2016 for $26 billion.
“AI is technology’s most important priority, and healthcare is its most urgent application,” said Microsoft CEO Satya Nadella in a statement. “Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud in Healthcare and Nuance.”
Mark Benjamin will remain CEO of Nuance, the companies said.
Nuance’s AI appeal
Nuance’s Dragon Ambient eXperience, or DAX, technology is probably what Microsoft covets the most in its deal. DAX is an AI software package that helps medical professionals with patient intake, documentation and telehealth — buzzy growth areas for the industry, particularly for hospitals during the influx of patients during the Covid pandemic.
Widespread adoption of AI technology in medical settings means DAX alone could be worth between $3 billion and $4 billion, according to Dan Ives, technology analyst at Wedbush Securities.
That technology fits nicely with Microsoft’s ambitions, as the company has been building a foothold in AI. In September, it acquired an exclusive license for GPT-3, a language model created by OpenAI, that generates human-like text. Elon Musk — who co-founded OpenAI in 2015 — criticized the move, saying, “This does seem like the opposite of open. OpenAI is essentially captured by Microsoft.”
Investors were mostly cheery about the merger: Microsoft’s stock was down slightly, while Nuance’s stock surged 16%.
“For Nadella & Co, this is the right acquisition at the right time with Microsoft doubling down on its healthcare initiatives over the coming years,” said Ives. “The Nuance deal is a strategic no brainer.”
In addition to health care, Nuance is also a leader in speech-to-text and communications software that could help Microsoft in its already entrenched corporate cloud business.
“I believe the company is acquiring a set of capabilities that will in time crossover into applications in call center, retail, financial services and more,” said Daniel Newman, the founding partner and principal analyst of Futurum Research.
Nuance’s technology has been used by Walgreens to help schedule Covid-19 vaccine appointments and by the Industrial Bank of Korea, which used it “to create the banking industry’s first biometrics solution for video calls.”
— CNN Business’ Rob McLean contributed to this report.