Nuance projects 2009 revenues of $410M with Philips acquisition

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With the acquisition of Philips Speech Recognition Systems, Nuance Communications said it will increase its ability to deliver speech-driven clinical documentation and communication solutions to healthcare organizations throughout Europe.

Under terms of the agreement, consideration for the transaction is €66 million, or approximately $96.1 million. Consideration comprised a cash payment of €21.7 million ($29.9 million U.S.) on Sept. 26, and a deferred payment of €44.3 million ($61.1 million U.S.) to be paid in cash on Sept. 21, 2009.

Nuance said that the opportunity for automated documentation solutions is significant in Europe, where an estimated $2 billion is spent each year for manually processing clinical information and where governments have made substantial investments to digitize healthcare systems, such as the $24 billion applied to the National Health Service National Program for IT in England.

“We saw a big opportunity to extend our healthcare business in Europe, since we are primarily a north American company,” Peter Durlach, senior vice president of marketing and product strategy at Dictaphone Healthcare Solutions, told Health Imaging News. “There has been a lot of potential opportunity in the last 24 months but we were not able to take advantage of it--with this acquisition, now we can.”

Durlach added that they are still in the process of working out the roadmap of exactly how Philips’ products will be integrated into Nuance’s.

“We are committed to SpeechMagic and the other technologies,” he said. “We haven’t been able to work out the details yet due to the way Philips handled the auction process but we are certainly going to make a best of breed technology between ours and theirs.”

He noted that the language coverage that Philips’ bring to the table is significantly larger than what they currently have available.  “We have had a lot of interest from end customers and larger OEM partners in the healthcare IT space for single solutions that they can deploy worldwide – and in some areas of the world, we have had gaps for this,” he noted. “Now we have a much better opportunity to have a global set of solutions than we did before.”

As a result of the acquisition, the Burlington, Mass.-based company expects to add between $36 million and $39 million in GAAP for revenue after adjusting revenue lost to purchase accounting in fiscal 2009.

 Thomas Beaudoin, chief financial officer at Nuance, said “we anticipate that our Healthcare business will now deliver worldwide revenues in excess of $410 million in fiscal year 2009. Operating margins in our healthcare business should be up sharply, above the corporate average for the full fiscal year, as we realize the synergies from fully integrating Philips and leverage the operational momentum in our North American healthcare business.”