Microsoft said on Monday that it would buy Nuance Communications, a provider of artificial-intelligence and speech-recognition software, for about $16 billion, as it pushes to expand its health care technology services.
In acquiring Nuance, whose products include the transcription tool Dragon, Microsoft is hoping to bolster its offerings for the fast-growing field of medical computing. Nuance has an established set of customers as well as a wide array of speech and text data related to health care, which is often a vital part of building new systems.
Microsoft and Nuance have been working together since 2019, but the acquisition signals that Microsoft has bigger ambitions for Nuance’s technology. Microsoft has been making large investments in industry-specific cloud technology, including health care, finance and retail.
Microsoft said the acquisition would double the size of the health care market where it competed, to almost $500 billion. The deal is Microsoft’s biggest takeover since its 2015 acquisition of LinkedIn for $26.2 billion.
“Nuance provides the A.I. layer at the health care point of delivery and is a pioneer in the real-world application of enterprise A.I.,” Satya Nadella, Microsoft’s chief executive, said in a statement.
When Microsoft buys a company, its executives typically believe they can do more with the technology than the company it is buying can, a model that fits the Nuance deal, said Brad Reback, an analyst at the investment bank Stifel. That Nuance has proved itself in health care, with its technical and complex vocabulary, means Microsoft could introduce other types of businesses.
“Being able to solve that problem makes it that much easier to handle other industries’ terminology,” Mr. Reback said. Nuance’s tools are also used mostly in the United States, so selling to a global powerhouse like Microsoft will let the company much more quickly sell internationally. “We saw the opportunity to superscale how we change an industry,” Mark Benjamin, Nuance’s chief executive, said in an interview.