Nuance Communications, Inc. was an American multinational computer software technology corporation headquartered in Burlington, Massachusetts, that marketed speech recognition and artificial intelligence software. The company's roots trace back to research at SRI International and a merger with ScanSoft in 2005. In April 2021, Microsoft announced an all-cash acquisition of Nuance for $19.7 billion, including debt, at $56 per share, which was completed in March 2022.
Origins and Early History
The Speech Technology and Research (STAR) Laboratory at SRI International spun off a company in 1994 that was initially named Corona Corporation and later renamed Nuance Communications. Nuance went public on the Nasdaq Stock Market in 1995. The underlying speech recognition technology originated from the STAR Lab, which was a leader in audio processing and spoken language research. In 1995, researchers developed the SRI Language Modeling Toolkit (SRILM), providing tools for building statistical language models used in speech recognition and machine translation.
Nuance achieved early commercial milestones in the late 1990s. In 1996, Charles Schwab & Co. deployed Nuance's speech recognition technology to let customers obtain stock quotes over the telephone, with the system capable of recognizing accented English. In 1997, Nuance developed the first large-scale commercial dialog system for United Parcel Service (UPS), handling high volumes of package status inquiries.
Merger with ScanSoft
The company that later merged with Nuance began as Visioneer, incorporated in 1992 to develop scanner hardware and software such as the PaperMax scanner and PaperPort document management software. Visioneer sold its hardware division to Primax Electronics in January 1999 and acquired ScanSoft from Xerox in March 1999, adopting ScanSoft as the new company name. ScanSoft's lineage included Kurzweil Computer Products, founded by Raymond Kurzweil in 1974 to develop the first omni-font optical character recognition system, which Xerox acquired in 1980 and later became Xerox Imaging Systems and then ScanSoft.
ScanSoft initially focused on desktop imaging software like TextBridge, PaperPort, and OmniPage. In December 2001, it acquired assets of Lernout & Hauspie, moving into speech recognition and competing with Nuance. Lernout & Hauspie had acquired Dragon Systems in June 2001 before going bankrupt. ScanSoft also acquired SpeechWorks in 2003. In September 2005, ScanSoft acquired and merged with Nuance Communications, with the combined entity adopting the Nuance name. The two companies had competed in the commercial large-scale speech application business for the prior decade.
Products and Partnerships
Nuance's speech recognition technology gained widespread recognition through a partnership with Apple. In 2013, Nuance confirmed that its natural language processing algorithms supported Apple's Siri voice assistant. This relationship highlighted Nuance's capabilities in Artificial intelligence and Machine learning for consumer applications.
In 2019, Nuance spun off its automotive division as the company Cerence, allowing Nuance to focus on healthcare applications. The company developed speech recognition solutions for clinical documentation and medical transcription, leveraging Deep learning and Neural network technologies to improve accuracy in specialized domains.
Data Breach
Between 2014 and 2017, Nuance exposed over 45,000 patient records due to a security vulnerability. This incident raised concerns about data privacy in healthcare technology and led to scrutiny of the company's security practices.
Acquisition by Microsoft
On April 12, 2021, Microsoft announced it would acquire Nuance for $19.7 billion, or $56 per share, representing a 22% premium over the previous closing price. This was Microsoft's second-largest acquisition at the time, after its $24 billion purchase of LinkedIn in 2016. Nuance's CEO, Mark Benjamin, remained with the company post-acquisition.
The deal faced regulatory review. The UK Competition and Markets Authority investigated antitrust concerns, and in December 2021 it was reported that the European Union would approve the deal. The acquisition was completed on March 4, 2022, integrating Nuance into Microsoft's Microsoft Azure cloud and healthcare AI offerings. In May 2023, Nuance announced an unspecified number of layoffs.
The acquisition positioned Microsoft to compete more strongly in healthcare AI, combining Nuance's speech recognition expertise with Microsoft's cloud infrastructure. The deal reflected a broader trend of major technology companies investing in Generative AI and specialized AI applications.