Microsoft has officially announced the acquisition of speech recognition company Nuance Communications. It paid $19.7 billion for the deal, and this is an excellent move by Microsoft to strengthen its presence in the healthcare business.
On Monday, the deal was reached, and Microsoft paid $56.00 per share, which is almost 23% above the closing price on Friday. CEO of Nuance Mark Benjamin will hold its position, and he must report to Scott Guthrie, executive vice president of Cloud & AI at Microsoft.
Paying $19.7 billion for a company with a $1.4 billion run rate seems like a bizarre move by Microsoft. However, the Covid-19 pandemic had an extraordinary impact on the valuation of the healthcare business. In the coming years, these companies will experience a huge growth in demands.
More and more tech companies are stepping into healthcare. Some of them incorporate health monitoring features into their products, and others, like Microsoft, prefer to buy a company. It is evident that healthcare is receiving more attention from tech companies.
Microsoft introduced Cloud for Healthcare in 2020. The acquisition of Nuance Communications will allow it to push the envelope in the healthcare industry. Nuance is currently selling AI tools for recognizing and transcribing speech.
Likewise, Microsoft CEO Satya Nadella believes Nuance’s health care tools were their primary motivation for acquiring the company. Nuance was founded in 1992, and it has over 7,000 employees now.
Nuance can be Microsoft’s trump card in the healthcare industry
Maybe we can address Nuance as one of the best purchases by Microsoft in recent years. The combination of it with Microsoft cloud infrastructures will bring a huge benefit to the industry and customers.
Moreover, Microsoft is seeking to increase its total addressable market (TAM) in the healthcare industry. The acquisition of Nuance helps Microsoft to reach $500 billion of TAM. According to a report by Nuance, their GAAP revenue in the fourth quarter of 2020 has been $345.8 million.
“AI is technology’s most important priority, and healthcare is its most urgent application,” Satya Nadella stated in the company’s blog post. “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 the growth of Microsoft Cloud for Healthcare and Nuance.”
The Covid-19 pandemic made tech companies rethink their strategies for the healthcare industry. More companies will step into the growing market of healthcare in the coming years and want to increase their total addressable market.