Manawatu Standard

Diversity at heart of big spend up

Microsoft is burning through money – or is it? David Court finds out.


Microsoft has lots of money, and it’s on a frenzied spending spree. This week it acquired the artificial intelligen­t (AI) speech recognitio­n company, Nuance Communicat­ions, for awhopping US$19.7 billion – or NZ$27.6B – (more on this in a bit), its second-biggest takeover since its US$26B purchase of Linkedin in 2016.

Add in its US$7.5B purchase of video game holding company Zenimax Media in September, its failed bid to buy Tiktok for US$30 million last year, and its ongoing US$10B bid for Discord, and you’d be forgiven for thinking Microsoft must be nearing the end of its cash reserves.

Is it? Nope. Not even close.

Like I said, Microsoft is a very cashrich company, with Forbes reporting that it’s sitting on a cash pile of US$130B as of December 2020.

So what’s the play here? Evolution and (further) diversific­ation ismy bet.

Microsoft has been milking its Windows and Microsoft Office cash cow for more than 30 years. And while that virtual udder won’t run dry anytime soon, it’s not going to last forever.

Microsoft, of course, has been walking this road for a long time already. Windows and Office is an outdated view of how Microsoft makes its money these days.

This year its first quarter financial results report revenue of US$37.2B (up 12 per cent) and a net income of US$13.9B (up 30 per cent), with Azure (its cloud computing service) leading theway.

Microsoft’s other offshoots – Gaming, Linkedin, Enterprise Services, and hardware devices – are all gaining on Windows and Office too.

And while there’s no obvious pattern to Microsoft’s recent acquisitio­ns – Nuance Communicat­ions, Zenimax Media and Discord are all very different companies – what’s undeniable is the diversity-of-product they bring to Microsoft.

This week’s acquisitio­n ofnuance Communicat­ions is particular­ly intriguing. Up until now, Nuance Communicat­ions was a company best known for providing the speechreco­gnition engine to Apple’s voice assistant, Siri.

When the news broke that Microsoft was buying this company for US$19.7B,

[Nuance] holds more than 10 million voiceprint­s across Australia and New Zealand alone.. .

tech journalist­s (myself included) scrambled to find out more about what made Nuance Communicat­ions so valuable.

The result was a bit underwhelm­ing at first. Microsoft’s purchase is 14.5 times Nuance Communicat­ions’ forecasted fullyear revenue. However, when you dig a little deeper, the deal starts tomake more sense.

Nuance Communicat­ions is amarket leader in conversati­onal and artificial intelligen­ce (AI) for healthcare.

This is amarket Microsoft is already involved in and now suggests the combinatio­n of the two companies will double its total addressabl­e market to US$500B. Health is big business.

But that’s not all. Nuance Communicat­ions is also responsibl­e for the ‘‘my voice confirms my identity’’ telephone banking biosecurit­y technology many of you will be familiarwi­th.

A quick look at Nuance Communicat­ions’ What We Do? page reveals an eye-opening statistic about this technology, claiming that it helped one United States bank prevent US$6.2M losses in fraud in a single year. Not to mention the countless hours it saved the bank’s call centre staff by verifying a user’s identity in amatter of seconds.

Today, the company holdsmore than 10 million voiceprint­s across Australia and New Zealand alone, and its technology is sophistica­ted enough to analyse more than 1000 characteri­stics of the user’s voice to verify their identity.

This isn’t a technology niche that’s only fit for the medical and telephone banking industry. The ability to accurately capture dialoguewi­ll add value to nearly all of Microsoft’s other offshoots – minute taking inmicrosof­t teammeetin­gs, (more) accurate dictation in Office, and gaming input for Xbox, to name just a few.

 ?? AP ?? The ability to accurately capture dialogue will add value to nearly all of Microsoft’s other offshoots.
AP The ability to accurately capture dialogue will add value to nearly all of Microsoft’s other offshoots.

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