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Microsoft to Acquire Nuance for $19.7 Billion

Brad Sams

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Microsoft has announced today that the company will acquire Nuance for about $19.7 billion. Once completed, this will be Microsoft’s second-largest acquisition following Linked In for $26.2 billion back in 2017.

Nuance is known for its voice technologies and solutions in the healthcare space. Microsoft is paying a premium for Nuance but the reasoning for the acquisition is likely a bit more technical than simply acquiring the book of business. The company does note that in the announcement that they expect Nuance’s technology to contribute to the company’s recently launched Microsoft Cloud for Healthcare.

The voice technologies that Nuance has created and more specifically, the patent portfolio it has amassed, could be one of the bigger drivers of the acquisition than any specific line of business. Microsoft has created its own voice technologies during the past decade and adding Nuance to the portfolio will boost its presence in the healthcare and customer engagement segments but owning the portfolio of patents will also help protect its voice technologies going forward.

Nuance is a public company and in calendar year Q4, the company posted revenue of $345.8 million with a net income of $7 million. With these results, Nuance’s financials will not significantly impact Microsoft’s results on a quarterly basis as the company posted results of $43.1 billion in revenue and a net income of $15.5 billion last quarter.

Considering the size of this acquisition and that both companies are public, it will take some time for this transaction to close. Microsoft expects the transaction to be complete by the end of the year and the company is making this an all-cash transaction too.

Upon closing, Microsoft expects Nuance’s financials to be reported as part of Microsoft’s Intelligent Cloud segment. Microsoft expects the acquisition to be minimally dilutive (less than 1 percent) in the fiscal year 2022 and to be accretive in the fiscal year 2023 to non-GAAP earnings per share, based on the expected close timeframe.

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