Microsoft acquires Nuance in $16B deal

TechCrunch Managing Editor Jordan Crook and TechCrunch News Editor Darrell Etherington join the Yahoo Finance Live panel to discuss Microsoft acquiring Nuance Communications for $16 billion and TechCrunch's new podcast, "Found."

Video Transcript

ZACK GUZMAN: In today's show, we're spotlighting the second biggest acquisition from Microsoft, the largest since LinkedIn. The company paying nearly $20 billion to acquire Nuance Communications, a leader in the speech software space, sending shockwaves-- I'll call them shockwaves-- through the tech space as Microsoft really focuses in on the opportunity there, particularly when it comes to healthcare and cloud products around that space.

And for more on that, I want to bring on our friends here at sister publication TechCrunch. Jordan Crook is managing editor at TechCrunch, alongside Darrell Etherington, TechCrunch news editor, joins us now. And, guys, love having you on not just because you're a sister publication, of course, but also because I love TechCrunch and the work you guys do. But Jordan, why don't we start with you about kind of what we're seeing here in this move by Microsoft to really get into the space and the price they're paying to acquire that company?

JORDAN CROOK: Yeah, I mean, I think the obvious thing here is that healthcare is such a giant industry. And to be good at natural language processing or text to speech or some of these kind of more complex AI machine learning methodologies, you have to be able to go industry specific. And nuance has done a great job at that. So I think that that's really the key here.

AKIKO FUJITA: Darrell, it feels like Microsoft has been shopping around for a while. Last year, we talked so much about how they were going after TikTok. Now there's talks of potentially going after Discord. They just acquired a gaming company earlier this year. And what do you think is the strategy for Microsoft right now in terms of what they look at with their footprint in the holes they're trying to fill to build on this momentum?

DARRELL ETHERINGTON: Sure, well, I think-- I mean, Jordan really touched on it there. It is all about industry specific success and expertise and about increasing their footprint for a lot of their enterprise customers, I think, honestly. Like, those are consumer plays, but I think more and more, especially on the conversational eye on the voice side, they're looking to enterprise. And they want to grow there because they've kind of retired their Cortana product, at least consumer facing. They retired the mobile app.

And what they're doing here is more like, OK, look, look at the tremendous impact of the COVID-19 pandemic over the last year. And look at how that has transformed healthcare. And one of the things that's come out of that is, we realized urgently we need triage for care, right? And what nuance has been able to do is build an amazing triage engine through their conversational AI to handle that. And they have tons of clients using it already. I think they have something like 500,000 doctors and nurses already engaging with their product. So that was, obviously, very attractive to Microsoft.

ZACK GUZMAN: As a company, you know, getting bought out by Microsoft, you know, anyone who's out there as a founder, it seems like a good way for things to end. Of course, this isn't the end for Nuance by being acquired by any stretch of the imagination, but interesting because you guys are launching a new podcast focusing in on the way that founders operate some of these companies, where they tend to go, the work that goes into eventually getting acquired, or just taking on some of these tech giants as well.

And Jordan, I mean, TechCrunch is kind of unique in the access that you guys have to these founders. But talk to me about what you're hoping to do with the new podcast that's just launching and really learn about the road and difficulties that these founders face.

JORDAN CROOK: Yeah, I think it's so common that we learn about the stories of big name founders like Steve Jobs and Evan Spiegel and Mark Zuckerberg. It's easy to look back once they've attained such tremendous success. But what Darrell and I get to do regularly is talk to founders who are at the earlier stage and have long, kind of drawn-out conversations with them. And only a fraction of that ever makes it into the article on Oh my god, I'm so sorry.

And so what we want to do is really expose those conversations and get into the nitty gritty, get into the human side of what it takes to build something from scratch and kind of let go of your safety net and dive in. And so, it's been a really fascinating, fun conversation so far.

AKIKO FUJITA: And Darrell, finally, it's been interesting to see a lot of companies that typically would not have come to market, coming to market this year, over the last year, through SPACs, so many other avenues. But we've also got huge valuations on the private side, too. What's your sense when you talk to these startups about how they're looking at their exits now? Has that shifted at all as a result of the environment we're in, in the public markets?

DARRELL ETHERINGTON: It definitely has shifted. I mean, I've had lots of conversations with founders about their approach to SPACs and why some have chosen to do SPACs. For instance, I spoke to Astra CEO recently, and he was very explicit about, I kind of wanted to essentially cut through the BS and get to the fixed amount of money quicker.

And same for [INAUDIBLE]-- they're both space companies-- and Peter Beck, you know, that for him, it was, OK, I know that this process is long and drawn-out and very painful and also dedicated if I do the traditional IPO route. And if I go ahead and do this, I know the fixed amount that I need, which I can set by negotiating the right pipe and everything. And that will be the amount I need to build my next rocket and test and fly it, right?

So he likes the fixed version of it. He likes that he's not playing a gamble on debuting to retail investors and hoping they react well. So I think that's kind of what the appeal is to the startup founders specifically. It's the speed, and it's sort of defined constraints. But definitely, it's something that comes up on the podcast, too, because we are talking to companies at various stages, and we're talking to companies that are getting closer to that public exit process and mulling the various options available to them.

AKIKO FUJITA: Well, certainly looking forward to listening to the podcast. Jordan Crook and Darrell Etherington from TechCrunch, thanks so much for joining us today.