Yahoo Finance’s Daniel Howley, Myles Udland, and Brian Sozzi discuss Microsoft’s latest acquisition.

Video Transcript

MYLES UDLAND: Sozzi, you mentioned it there in Microsoft this morning, confirming scoop over the weekend that are buying Nuance Communications in a $16 billion deal. This values Nuance at $56 per share, we should say. Stock was trading just below that, 55, 70, or so as we came in to this segment right at the top of the hour, above 22%. Yahoo Finance's Dan Howley joins us now to talk a bit about this deal, Howley. And I guess we should start, maybe for the uninitiated, just what it is Nuance does, and then we can get into what Microsoft might want out of them.

DANIEL HOWLEY: Yeah, nuance has been known for quite a long time for its capabilities as far as voice recognition goes. And so what Microsoft seems to be doing here is working this into their health care platform, which they launched last year. And so it'll provide them with an extra boost there.

Amazon also has its own health care platform. This is all based in the cloud. So it will boost Microsoft's Azure. In a statement, we have Satya Nadella, Microsoft CEO, saying AI is technology's most important priority, and health care is its most urgent application. Together with our partner ecosystem, we will provide advanced AI solutions into the hands of professionals everywhere to better drive decision-making and create more meaningful connections as we accelerate growth of Microsoft cloud in health care and Nuance.

So obviously, they're going to be leaning on this voice recognition technology and the AI capabilities that they have from Nuance to really push forward Microsoft's efforts in the health care space. So a big move on their part. It's worth noting, by the way, that Microsoft did have its own first voice recognition capabilities. They still does, really. And it's Cortana platform. But it's been slowly kind of clawing that back, bringing some of it offline actually for iOS and Android app versions of its Cortana app. So it'll be interesting to see where they put nuance, if they do, in the consumer space.

BRIAN SOZZI: Dan Ives over at Wedbush [INAUDIBLE] right now, saying this the right acquisition at the right time for Microsoft. Would you agree with that?

DANIEL HOWLEY: I think it's a good move for them. I can't obviously say whether or not Microsoft make the right moves, because I don't run them. But I think it does help them a good deal in the space just because they recently launched their health care option. And look, this is a way for them to further expand the cloud system and Azure.

They're going to report on Nuance revenue in their intelligent cloud platform when they do have their next earnings report. I think that for Microsoft, it really is all about the cloud, and it's where the next growth opportunity for them really is. They've been doing well as far as cloud goes. That's really all we talk about as far as Microsoft.

The cloud is tied heavily to their valuation. But I think that as far as health care goes, that's really the next opportunity for them. And there's only so many cloud providers that can work in the health care space because of the strict requirements that are put on them by the government. So Microsoft really making itself stand out here.

But again, Amazon is also playing in this space as well. So it's not like Microsoft is going to be anywhere that Amazon isn't. It happens to just be that this could help them provide a better solution over Amazon, and that's the way that they could kind of pull customers away from them.

MYLES UDLAND: All right. Dan Howley with the latest on Microsoft's biggest acquisition since the acquisition of LinkedIn. $16 billion deal for Nuance Communications. nuance trading there about $1.50 below the implied price for that buyout.