Microsoft’s pending $19.7 billion deal to purchase Nuance Communications is the most recent in what’s develop into a buying spree for the Redmond, Wash. firm.
The technique appears to have gained the eye of your entire tech universe with one notable exception: federal regulators.
This will’t be mentioned at Amazon, Google, Fb, and Apple because the remaining 4 of the massive 5 tech giants now face various ranges of antitrust and anti-competitive scrutiny whereas Microsoft scoops up corporations at a file fee.
If the Nuance deal is accepted by June 30, this fiscal yr will doubtless be Microsoft’s largest for acquisition spending, topping the $26.9 billion spent in 2017 when it purchased LinkedIn. Microsoft accomplished its $7.5 billion deal to purchase ZeniMax Media final month; is reportedly in discussions to purchase Discord; has proven curiosity in Pinterest; and made a bid for TikTok final fall.
And extra offers could possibly be on the way in which.
“In our opinion, Microsoft is on the M&A warpath over the subsequent 12 to 18 months and Nuance could possibly be step one in an elevated urge for food for offers in 2021,” Dan Ives, an analyst with Wedbush Securities, wrote in a report Monday.
Microsoft had $132 billion in money and short-term investments as of December. In its personal report, Moody’s mentioned the Nuance acquisition “could have minimal impact on Microsoft’s liquidity and credit score metrics.”
4 of Microsoft’s 5 largest acquisitions up to now — LinkedIn ($26.2 billion); GitHub ($7.5 billion); ZeniMax ($7.5 billion); and Nuance — occurred previously 4 years. CNBC famous that of the 5 giants, solely Amazon has spent greater than $5 billion on an acquisition over the previous 5 years (Complete Meals).
The shortage of federal consideration isn’t fully a coincidence, consultants mentioned. Microsoft, after all, has been there earlier than. And possibly it’s realized a factor or two, provided professor Margaret O’Mara, a College of Washington historian and skilled of the rise of huge tech within the U.S.
One distinction is that since 2000, Microsoft has rigorously constructed alliances in Washington D.C., she mentioned. And it has a far deeper historical past with regulators (than the opposite 4) in consequence. “Microsoft is aware of what it’s doing and (CEO) Satya Nadella’s message on not promoting knowledge ought to positively resonate with lawmakers,” O’Mara mentioned.
Microsoft President Brad Smith reportedly suggested lawmakers on the antitrust subcommittee forward of a Congressional antitrust listening to final yr the place Amazon CEO Jeff Bezos, Apple CEO Tim Cook dinner, Fb CEO Mark Zuckerberg, and Google CEO Sundar Pichai testified — however not Nadella.
However, O’Mara famous, the shortage of public information of scrutiny doesn’t imply there may be none. And in addition, it’s potential the corporate is concentrating on purchases that don’t result in market dominance and subsequent antitrust investigations. “(The Nuance deal) isn’t a transparent monopoly play,” she mentioned.
Microsoft plans to make use of Nuance’s speech recognition and synthetic intelligence tech to bolster its healthcare initiatives. Different giants reminiscent of Amazon and Google have dabbled on the perimeters of healthcare however haven’t but earned significant income.
Nadella mentioned the Nuance deal will enhance the corporate’s whole addressable market in healthcare to almost $500 billion. He additionally famous functions for Nuance’s tech past healthcare reminiscent of enterprise AI and biometric safety.
Ives referred to as the Nuance deal a “strategic no-brainer” and mentioned he expects no main regulatory hurdles for Microsoft.
“In an setting during which its FAANG brethren are as much as their eyeballs in antitrust regulatory scrutiny each within the Beltway and Brussels, Microsoft (which has already lived by way of its regulatory trauma within the 1990’s/early 2000’s) now finds itself in an enviable place to be in ‘offensive mode’ when its involves increasing its cloud M&A footprint,” Ives wrote. “We consider MSFT will probably be each vertical particular in addition to potential CRM associated offers to bulk up its cloud platform trying forward.”
Microsoft has had a checkered historical past with main acquisitions. In 2012, the corporate took a $6.2 billion writedown, largely tied to aQuantive, which it admitted on the time wasn’t understanding as deliberate. In 2015, Microsoft minimize 7,800 jobs and took a $7.6 billion cost associated to its acquisition of Nokia’s smartphone enterprise.
LinkedIn and GitHub seem extra promising, with Microsoft making use of a unique technique: use its huge sources to supercharge the businesses it acquires, after which get out of the way in which.
Talking on CNBC, Linkedin co-founder and Microsoft board member Reid Hoffman famous “how good Satya and his crew are at integrating corporations, each operationally and culturally.”
“They’ve performed an amazing job with LinkedIn and GitHub,” he mentioned. “One might be very optimistic about what that integration will appear to be with Nuance.”