Speech vendor Nuance buys Dictaphone for $357 million

Nuance is expanding its business providing speech technology to the health-care market with a $357 million acquisition of Dictaphone.

Acquisition-prone speech technology firm Nuance Communications continues to bulk up. On Tuesday it disclosed plans to buy Dictaphone, a major player in the health-care dictation automation market that traces its roots back to Alexander Graham Bell.

Nuance is spending US$357 million on Dictaphone. It expects to gain between $80 million and $85 million in revenue this year, and an additional US$180 million in 2007, as a result of the buy. That represents a significant expansion of health-care business for Nuance, according to the company.

Manual transcription of dictation in health-care settings costs about US$15 billion annually, according to Nuance, which says that speech transcription technology can cut those costs dramatically.

Nuance's dictation products are largely complementary to Dictaphone's, said Matt Revis, director of product management for dictation solutions at Nuance. He characterized Nuance's role in dictation as providing core technology -- Dictaphone is a customer -- around which Dictaphone adds workflow components

Customers can expect to see a road map outlining integration and development paths for the combined product offerings in about two or three months, Revis said. The deal is expected to close on March 31.

The Dictaphone organization will be the foundation of a health-care unit within Nuance's productivity applications division, headed by John Shagoury, according to Rick Mark, Nuance's director of corporate communications. However, Marks declined to comment specifically on the health-care group's leadership and structure, and whether key Dictaphone executives will remain with Nuance, other than to say that a "good number of senior management will remain onboard for a foreseeable transition."

Nuance said it will gain about 100 patents and patents pending from Dictaphone, beefing its portfolio of intellectual property to about 500 patents in the speech arena.

Although Dictaphone formally came into being in 1923, it traces its lineage back to 1881 when Bell and two associates joined forces to produce a recording device that used a wax-covered cylinder. It pioneered the dictation business, introducing the first electronic dictation machines in 1939.

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