Nuance makes money by selling software tools that help to transcribe speech. The firm powered the speech recognition engine behind Apple’s voice assistant, Siri.
The purchase of Nuance Communications is the second largest in Microsoft’s history, after its acquisition of networking site LinkedIn in 2016.
Microsoft said it would use the acquisition to boost its software and artificial intelligence expertise for healthcare companies. So-called “telehealth” and remote doctor visits have boomed in lockdown, with growth forecast to continue after the pandemic.
“Nuance provides the AI layer at the healthcare point of delivery,” Microsoft chief executive Satya Nadella said in a statement. “AI is technology’s most important priority, and healthcare is its most urgent application.”
The deal, which includes Nuance debt, is expected to be completed this year. Including debt assumption, the deal is actually worth $19.7bn.
Nuance, known for pioneering speech technology and helping to launch Apple’s virtual assistant, Siri, operates in 28 countries and reported revenues of $1.5bn in its last full financial year.
The Massachusetts-based company said it served 77% of US hospitals, providing services including clinical speech recognition, medical transcription and medical imaging.
Through this deal, Microsoft is trying to leapfrog competitors like Google and Amazon as they face record antitrust scrutiny.
Its cloud business has also been booming during the pandemic. Microsoft’s stock hit an all-time high on Friday, as it approaches $2 trillion in market value.