What's going on?
Microsoft announced very slowly and clearly on Monday that it’s buying speech-recognition company Nuance Communications, but it still accidentally ended up ordering toilet paper.
What does this mean?
Microsoft is already a major player in everything from cloud computing to gaming, but now the tech giant has found itself a new plaything in the form of healthcare artificial intelligence. Nuance is best-known for creating the voice-recognition technology that went into Apple’s Siri, but it’s since narrowed its focus to tools that transcribe doctor-patient discussions, integrate them into their health records, and help predict those patients’ future needs.
Microsoft is reportedly paying $56 a share for Nuance – 23% higher than the company’s share price just before the deal was announced. That would value Nuance at $16 billion, making the acquisition Microsoft’s second-biggest after its buyout of LinkedIn in 2016. And Microsoft’s not done yet: the tech giant’s in talks to buy video game chat platform Discord, and it’s approached TikTok and Pinterest in the past year too.
Why should I care?
For markets: Has Microsoft spotted the next high-growth sector?
That $16 billion valuation comes in at more than 10 times Nuance’s sales last year, so the deal isn’t exactly cheap. But Microsoft seems to have noticed that the healthcare sector hasn’t been digitalizing nearly as quickly as, say, retail and banking, and it’s been trying to make inroads for a while (tweet this). Now, with Nuance on its side, it might be able to take full advantage of all that untapped growth.
The bigger picture: Stay away from the sun, Microsoft.
Antitrust regulators won’t want to see one firm dominating technology in as sensitive a sector as healthcare, so investors might want Microsoft to be careful with its ambitions. They’ve recently been reminded how costly it can be to get on rulemakers’ bad sides, after all: Chinese ecommerce giant Alibaba just got slapped with a $2.8 billion fine – 4% of its 2019 revenue – for anti-competitive practices.