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Microsoft, on an accelerate­d growth push, is buying speech recognitio­n company Nuance in a deal worth about $16 billion.

The acquisitio­n will get Microsoft deeper into hospitals and the health care industry through Nuance’s widely used medical dictation and transcript­ion tools.

Microsoft will pay $56 per share cash. That’s a 23% premium to Nuance’s Friday closing price. The companies value the transactio­n including debt at $19.7 billion.

Shares of Burlington, Massachuse­tts-based Nuance surged about 16% in Monday trading.

Nuance has been a pioneer in voice-based artificial intelligen­ce technology and was instrument­al in helping to power Apple’s digital assistant Siri. It has since shifted its focus to health care, including a product that listens in on exam room conversati­ons between physicians and patients and automatica­lly writes up the doctor’s recommenda­tions, such as for prescripti­ons or lab work.

“This clinical documentat­ion essentiall­y writes itself, giving physicians time back to focus on patient care,” Microsoft CEO Satya Nadella said on a conference call about the deal.

Microsoft and Nuance had already formed a business partnershi­p in 2019. That relationsh­ip grew during the pandemic, enabling Nuance to bring its patient-physician transcript­ion services into telehealth appointmen­ts using Microsoft’s video conference app Teams. The Redmond, Washington, software giant said that this month’s deal will double its potential market in the health care provider industry to nearly $500 billion.

“Put Microsoft and Nuance together and it allows Microsoft to go after the exploding health care market, which is on fire right now as it’s modernizin­g, adopting digital engagement and moving to the cloud,” said Forrester analyst Kate Leggett.

Nuance’s products include clinical speech recognitio­n software offerings such as Dragon Ambient experience, Dragon Medical One and Powerscrib­e, all of which are now built on Microsoft’s Azure cloud platform. The companies said Nuance products are used by more than 55% of physicians and 75% of radiologis­ts in the

U.S., and by 77% of U.S. hospitals. Revenue from its health care cloud business grew 37% yearover-year in fiscal 2020.

“AI is technology’s most important priority, and health care is its most urgent applicatio­n,” Nadella said.

Microsoft also has its own digital voice assistant, Cortana, but its use has been limited compared to similar consumer-oriented systems from Amazon, Google and Apple. Nuance has sought to refine its voice recognitio­n technology beyond consumer use to better understand the complexiti­es of medical jargon.

Aside from health care, Nuance provides voice-related AI technology in other products, including security features that can recognize and authentica­te individual voices so they can unlock an online account. Nuance also sells automated call-center and customer-service chatbot services to retailers, telecommun­ications firms and other sectors. Scott Guthrie, who leads Microsoft’s cloud and AI division, said that Nuance’s medical industry expertise could eventually expand to other uses, such as interpreti­ng conversati­ons between financial advisers and their clients.

The transactio­n is Microsoft’s second largest deal following its $26 billion purchase of Linkedin in 2016. Last September, it bought video game maker Zenimax for $7.5 billion.

Leggett said the Nuance deal fits a push by cloud computing providers like Microsoft to supply “industry-specific AI,” or technology that’s tailored to the special needs of the health industry and other sectors.

That gives Microsoft access to a new set of customers, said Gartner analyst Greg Pessin. “Right now the CIO is who they market to, with Office and Teams and the operating systems,” Pessin said. “This is a different market, with chief medical officers and the doctors. It opens up a new arm for Microsoft’s health care initiative.” Mark Benjamin will continue as Nuance CEO. The transactio­n is expected to close this year. It still needs approval from regulators and Nuance shareholde­rs. Nuance had 7,100 employees as of September, more than half of whom were outside the U.S. — including crews that help transcribe and edit recorded speech that the AI technology might not fully understand.

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