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Nuance selling its document business for $400 million

Nuance Communications Inc. is expected to release an earnings report on Monday.

Speech-recognition company Nuance Communications Inc. is getting out of the document imaging business.

Nuance, based in Burlington, has agreed to sell the business to privately held document management company Kofax Inc. of Irvine, Calif., for $400 million. The deal is expected to close by March.

Mark Benjamin, who became Nuance’s chief executive officer in April, said in a statement that the sale of the business will allow the company to direct more resources to its top priorities — building the company’s capabilities in artificial intelligence, and migrating more of its speech recognition services to the Internet cloud.

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“While selling the Document Imaging division was not an easy decision given its many years of contributions and dedication of our Imaging associates,” said Benjamin, “ it became clear in our portfolio reviews that this is the right outcome.”

Nuance, founded in Menlo Park, Calif., was a pioneer in the development of consumer and corporate software capable of recognizing human speech. In 2005, it was acquired by its Massachusetts rival ScanSoft, which also had a document imaging business. Nuance became the name of the merged company, which became the leading maker of speech transcription services for the health care industry, and also offered speech recognition technology for devices ranging from desktop computers to cellular phones.

Nuance stuck with document imaging, which brought in $217 million during fiscal year 2017. That’s more than 10 percent of the company’s total revenue of $1.9 billion. And while Nuance as a whole posted a 2017 net loss of $151 million and hasn’t turned a full-year profit since 2012, spokesman Richard Mack said the document unit is profitable.

Still, the decision to sell followed a strategic review launched by Benjamin. “While it’s been a very good business, it doesn’t fit into the core strategic thesis of Nuance,” said Mack.

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Tom Roderick. managing director at Stifel Financial Corp. in Chicago, called the document business “a division that really didn’t interact with the rest of the company at all…it was widely expected that they would sell it off.”

Meanwhile, Nuance derives nearly half of its revenue from its health care business, which is transitioning to a cloud-based model, where customers will subscribe to services provided over the Internet, instead of buying copies of software. Nuance is also enjoying growth in its automotive business which makes software that responds to a driver’s voice commands. Nuance software has been installed in over 200 million cars, and the company is in the process of setting up its automotive line as a separate business unit.

A report earlier this year from Bloomberg News said that Nuance was considering the sale of this business, and Roderick thinks that even after selling off the document unit, Nuance might put its car software operations the block. That way, Nuance won’t have to spend millions of dollars fending off massive rivals entering the car business, such as Amazon, with its Alexa speech recognition software.

Nuance did not comment on the possibility of selling its automotive unit. But Mack said that the company’s car software is designed to complement offerings from Amazon and other firms, rather than compete against them.


Hiawatha Bray can be reached at hiawatha.bray@globe.com. Follow him on Twitter @GlobeTechLab.