Microsoft is nearing a deal to buy voice recognition pioneer Nuance Communications that would value the artificial intelligence company at about US$16bn ($22.7 billion), according to people briefed about the matter.
The deal would be the second-largest acquisition ever by Microsoft. It comes after the tech giant had been exploring a number of takeover opportunities over the past 12 months, including an approach for social media groups TikTok, Pinterest and Discord.
People briefed about the matter said a deal could be announced this week as the two sides are close to finalising the transaction. They warned there was still a slim chance that the deal could fall apart.
Nuance, based in Burlington, Massachusetts, was one of the early developers of speech recognition AI. Its technology was used to power the voice responses in Apple's virtual assistant, Siri.
The company's voice recognition systems are used in a wide range of industries. After years of small acquisitions, however, it has been trying to strip back its business and refocus on a handful of markets to rekindle growth.
Its revenues shrank in each of the past two years, and it has spun off or sold a number of business units, rebuilding primarily around cloud-based systems for hospitals and doctors. Inroads in healthcare have contributed to a rebound in its shares, which have more than tripled from a low point last March, valuing it at around $13bn.
Microsoft is a leader in the natural language processing AI that underpins such systems. A Nuance acquisition would give it a way to sell to a large number of new customers in healthcare, financial services and telecoms, among other industries. However, Nuance only made $29m in net income last year, after several years of losses, and its revenue has fallen more than a quarter since peaking above $2bn in 2018.
Microsoft has been on a buying spree over the past few years as it has used its strong balance sheet to further bolster its business. It acquired professional networking site LinkedIn for $26bn in 2016. Two years later it bought code repository group GitHub for $7.5bn, and six months ago it took over private gaming company ZeniMax for $7.5bn.
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The Seattle-based tech giant, which specialises in enterprise cloud computing services used by businesses and government rather than consumers, has been able to hoover up several assets as it has avoided the political backlash that has made it more difficult for Facebook and Google to make big acquisitions.
Bloomberg first reported that the two companies were in advanced discussions.
- Financial Times