Twenty years ago the US government filed a lawsuit against Microsoft for abusing its market power. Today Microsoft is building an empire because the country’s regulatory focus is on its biggest competitor.
Microsoft announced Monday that it had acquired Nuance Communications for $ 16 billion ($ 19.7 billion including net debt). The deal gives Microsoft a company that specializes in speech transcription and related artificial intelligence software. Nuance has a special niche in healthcare, offering software to digitize doctor-visit conversations and facilitate clinical documentation.
The acquisition comes about a month after Microsoft closes its $ 7.6 billion deal for ZeniMax, the parent company of video game maker Bethesda. This transaction is designed to strengthen Microsoft’s Xbox against growing competition in video games. Microsoft was also in talks to acquire Discord, a voice, text and video chat platform for games, for more than $ 10 billion. These discussions, according to someone familiar with the matter, coincided with the Nuance transactional discussions that began in December.
Microsoft’s recent deal talks don’t stop there. The company almost took over TikTok’s operations in the US, Canada, Australia and New Zealand last year. The deal was discussed in the $ 20 billion to $ 30 billion range. Microsoft recently reached out to Pinterest to measure interest in sales, according to a February report in the Financial Times. Pinterest has a market cap of more than $ 51 billion.
Less than three years ago, Microsoft paid $ 7.5 billion for GitHub. Less than five years ago, Microsoft paid more than $ 26 billion for LinkedIn.
Spending tens of billions of euros on acquisitions differs greatly from the strategies pursued by the world’s other technology supergiant – Apple, Amazon, Google and Facebook. It alsoCoincidentally, Congressional Democrats and government agencies, including the DoJ and the FTC, have been investigating closely whether Apple, Amazon, Google, and Facebook have abused their market power and are considering splitting their businesses or unraveling previous large acquisitions.
Besides Microsoft, Amazon is the only member of the Big Five to have spent more than $ 5 billion on an acquisition in the past five years and bought grocery chain Whole Foods for more than $ 13 billion in 2017.
Nuance is the fourth such acquisition by Microsoft.
Not ‘any aggregation game’
Apple, Amazon, Google, and Facebook, aware that they are under regulatory fire, are proceeding cautiously with larger acquisitions, according to those familiar with the matter. A major buy for either of them would almost certainly attract political attention, especially since their market cap has skyrocketed during the pandemic. It is possible that a large M&A deal could become the catalyst for more draconian measures like a business failure or forced divestments.
However, Microsoft has avoided the same level of scrutiny. That eliminates bidding wars and makes Microsoft the current buyer of choice – a role it probably wouldn’t have played five years ago.
That dynamic emerged during the TikTok discussions last year when Google felt it couldn’t get a deal on the U.S. assets due to its regulatory positioning.
CEO Satya Nadella pointed out in an interview with CNBC why he believes the government has treated Microsoft – a company with a market valuation of $ 1.9 trillion – differently.
“Our job is to provide technology for this [doctors and providers] can keep all data safe, “said Nadella, speaking specifically about Nuance.
“This is not about an aggregation game. This is about pure platform providers. Microsoft makes it very clear in how we approach most of what we do.”
In other words, Nadella argues that Microsoft is agnostic to deliver technology while competitors use consumer data in potentially harmful or monopoly ways.
Microsoft shareholders will ultimately have to decide how much Empire Building they are comfortable with. Nadella turned the company around with its focus on enterprise technology. Nuance fits the focus. Other destinations are further away. But, as Wedbush analyst Dan Ives wrote in a statement to clients, “Redmond is clearly on the ‘offensive’ to M&A with the company in a clear position of strength.”
So far, shareholders aren’t concerned about the Nuance deal, sending Microsoft shares up about 0.5% on Monday afternoon.
WATCH: Microsoft, Nuance CEOs on $ 16 Billion Deal, Cloud Strategy and AI Solutions for Healthcare
Less than three years after Microsoft acquired GitHub for $ 7.5 billion. Less than five years ago, Microsoft bought LinkedIn for $ 26.2 billion.
None of the other tech giants – Amazon, Google, Apple, or Facebook – have spent anywhere nearby
on the aspects of regulation. These are super important Tipioocs.
One of the things we do – all labout vendors patiets doctors – their data. Deploy technology so they can actually protect data – even use AI to advance health care. no aggretaion game – pure platform provider. Microsoft is different in how we approach most of what we do.