Microsoft’s profitable business means it has money to spend. It ended 2020 with $132 billion in cash and has been actively looking for big deals to put that money to use. It announced a deal in September to spent $7.5 billion on ZeniMax Media, the parent company of gaming studios that make major titles like Doom and Quake.
But other potential acquisitions have not always panned out. Last year, a blockbuster bid to buy TikTok, the viral social network, turned into a political soap opera and fell apart. It has also looked at buying Discord, a live chat community largely used by gamers, though the status of those talks is unclear.
Under the terms of the deal, Microsoft will pay $56 a share in cash, up 23 percent from Nuance’s closing price on Friday — a total of about $16 billion. Including assumed debt, the transaction values Nuance at about $19.7 billion.
Nuance was a pioneer in the field of speech recognition. It led the market in the 1990s and 2000s and provided part of the underlying technology for Siri, the talking digital assistant that made its debut on the Apple iPhone in 2011. Licensing technology to Apple and other companies was a key part of its business.
Li Deng, who helped lead speech recognition research at Microsoft for nearly two decades, said in an email interview that he urged his bosses to acquire Nuance in 1999, but Microsoft balked, feeling the price was too high.
Speech recognition underwent a sea change in 2010, when a team of researchers at a Microsoft research lab outside Seattle built a new kind of speech recognition system using a method called “deep learning.” This method — which was far more effective than earlier technologies — rapidly spread across the industry, with companies like Microsoft, Google and IBM rising to the fore.
This is the technology that now allows Siri, the Google Assistant and other digital assistants to recognize spoken words with near-human-level accuracy. Companies like Microsoft and Google also sell the technology to other companies through what are called cloud computing services.