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Microsoft's (MSFT) Nuance Buyout Faces EU Antitrust Scrutiny

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Microsoft’s (MSFT - Free Report) acquisition of Nuance Communications is facing comprehensive scrutiny by the EU antitrust regulatory authority, per a report from Reuters.

According to Reuters, the antitrust regulatory body has prepared a questionnaire, which seeks answers from competitors and clients as to how the Microsoft-Nuance deal could affect them. There is no official word on the matter from either company.

In November 2021, Microsoft and Nuance filed for obtaining approval to go ahead with the deal from the European Commission's competition bureau. The deadline is set for Dec 21, 2021, by which the regulatory body needs to either approve the deal or announce a deeper probe regarding the acquisition, added Reuters.

Nuance Communications’ planned acquisition by Microsoft has already received approvals from the U.S. Department of Justice (June 2021) and the Australian Competition Commission (October 2021), added the report.

In April 2021, Microsoft had announced the acquisition of Nuance for $19.7 billion (including Nuance’s net debt) in an all-cash deal.

 

How Will Nuance Buyout Aid Microsoft?

Nuance Communication offers innovative conversational Artificial Intelligence (AI) tools to boost business productivity. The company’s healthcare delivery solutions like Nuance electronic health record (EHR) services, Dragon Ambient eXperience (DAX), Dragon Medical Virtual Assistant, Dragon Medical One are expected to witness continued momentum amid the ongoing pandemic.

In the last reported quarter, Nuance reported non-GAAP revenues of $333.1 million, up 8.3% on a year-over-year basis driven by strength in the Dragon Medical and DAX offerings. Non-GAAP earnings per share came in at 9 cents, down 35.7% year over year.

Nuance Communications buyout is expected to increase Microsoft’s total addressable market or TAM in the healthcare domain to $500 billion, noted the software giant. Microsoft added that Nuance solutions are leveraged by nearly 77% of hospitals as well as used by more than 55% of physicians and 75% of radiologists in the United States.

Back in April 2021, Microsoft announced that it was expecting the deal to close by end of 2021. With the deeper scrutiny by EU regulators, the conclusion of the deal might take more time.

Zacks Rank & Stocks to Consider

Microsoft currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader technology sector include Arrow Electronics (ARW - Free Report) and Alphabet (GOOGL - Free Report) . Both the stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

For Arrow Electronics, the Zacks Consensus Estimate for 2021 earnings is pegged at $14.60 per share, up 8.1% in the past 60 days. The long-term earnings growth rate of the company is pegged at 27.4%.

Arrow Electronics’ earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 18.6%. Shares of the company have rallied 28.6% year to date.

For Alphabet, the Zacks Consensus Estimate for 2021 earnings is pegged at $108.29 per share, up 6.3% in the past 60 days. The long-term earnings growth rate of the company is pegged at 25.8%.

Alphabet’s earnings beat the Zacks Consensus Estimate in each of the preceding four quarters, the average surprise being 41.5%. Shares of the company have rallied 68.1% year to date.


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