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| === Main offerings of the company === | | === Main offerings of the company === |
| The company offers an array of solutions under three primary segments: Healthcare, Enterprise, and Other. | | The company offers an array of solutions under four primary segments: Healthcare, Enterprise, Automotive, and Other. |
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| The Healthcare segment focuses on improving and simplifying clinical documentation through solutions that comprehend and analyse clinical speech and language. It also focuses on improving care quality, reducing physician burnout, integrating quality measures, and facilitating reimbursement. This segment provides products like Dragon Medical One, a cloud-based speech recognition solution, and Nuance Dragon Ambient eXperience (Nuance DAX), an AI powered clinical documentation solution. These tools enhance clinical documentation efficiency, accuracy and accessibility. | | The Healthcare segment focuses on improving and simplifying clinical documentation through solutions that comprehend and analyse clinical speech and language. It also focuses on improving care quality, reducing physician burnout, integrating quality measures, and facilitating reimbursement. This segment provides products like Dragon Medical One, a cloud-based speech recognition solution, and Nuance Dragon Ambient eXperience (Nuance DAX), an AI powered clinical documentation solution. These tools enhance clinical documentation efficiency, accuracy and accessibility. |
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| The Enterprise segment employs speech, natural language understanding, and AI to automate customer solutions across various channels, including voice, mobile, web, and messaging. This segment delivers intelligent engagement solutions and utilises Conversational AI, Engagement AI, and Security AI to better interact with customers. Examples include virtual assistant and chatbots for enhanced customer service to achieve the best possible business outcomes. | | The Enterprise segment employs speech, natural language understanding, and AI to automate customer solutions across various channels, including voice, mobile, web, and messaging. This segment delivers intelligent engagement solutions and utilises Conversational AI, Engagement AI, and Security AI to better interact with customers. Examples include virtual assistant and chatbots for enhanced customer service to achieve the best possible business outcomes. |
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| The Other segment consists mainly of voicemail transcription services. | | The Automotive segment offers embedded and cloud-based automotive solutions. |
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| | The Other segment delivers mainly language and translation services that aren't healthcare or enterprise focused. It includes the SRS and Devices businesses. |
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| Serving a diverse range of industries, from healthcare and financial services to telecommunications, government, and retail, Nuance markets and sells its innovative solutions directly and through an extensive network of resellers. These resellers encompass system integrators, independent software vendors, value-added resellers, distributors, hardware vendors, telecommunications carriers, and e-commerce websites globally. | | Serving a diverse range of industries, from healthcare and financial services to telecommunications, government, and retail, Nuance markets and sells its innovative solutions directly and through an extensive network of resellers. These resellers encompass system integrators, independent software vendors, value-added resellers, distributors, hardware vendors, telecommunications carriers, and e-commerce websites globally. |
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| == Acquisition by Microsoft == | | == Acquisition by Microsoft == |
| On March 4<sup>th</sup> 2022, Microsoft Corp completed the acquisition of Nuance Communications Inc. in all cash transaction valued at $18.8<ref>https://www.microsoft.com/investor/reports/ar22/index.html</ref> billion, inclusive of Nuance’s net debt. This is the third largest acquisition in Microsoft history after Activision-Blizzard and LinkedIn. | | On March 4<sup>th</sup> 2022, Microsoft Corp completed the acquisition of Nuance Communications Inc. in all cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt. This is the third largest acquisition in Microsoft history after Activision-Blizzard and LinkedIn. |
| [[File:MS + NUANCE.jpg|thumb|311x311px]] | | [[File:MS + NUANCE.jpg|thumb|311x311px]] |
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| == Financials == | | == Financials == |
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| === Historic key financials <ref>https://www.capitaliq.com/CIQDotNet/Financial/KeyStats.aspx?CompanyId=346200</ref> ===
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| {| class="wikitable mw-collapsible"
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| |-
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| |For the Fiscal Period Ending
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| |12 months
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| Sep-30-2020A
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| |12 months
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| Sep-30-2021A
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| |12 months
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| Dec-31-2021A
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| |-
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| |Currency (in millions)
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| |USD
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| |USD
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| |USD
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| |-
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| |-
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| |Total Revenue
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| |1,283.8
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| |1,362.4
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| |1,338.1
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| |-
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| |Growth Over Prior Year
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| |1.0%
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| |6.1%
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| |5.5%
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| |-
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| |-
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| |Gross Profit
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| |790.4
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| |853.1
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| |821.6
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| |-
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| |Margin %
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| |61.6%
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| |62.6%
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| |61.4%
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| |-
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| |-
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| |EBITDA
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| |170.1
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| |186.7
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| |133.6
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| |-
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| |Margin %
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| |13.2%
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| |13.7%
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| |10.0%
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| |-
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| |-
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| |EBIT
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| |79.1
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| |98.7
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| |45.4
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| |-
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| |Margin %
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| |6.2%
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| |7.2%
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| |3.4%
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| |-
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| |-
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| |Earnings from Cont. Ops.
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| |(13.0)
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| |(17.4)
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| |(81.9)
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| |-
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| |Margin %
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| |(1.0%)
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| |(1.3%)
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| |(6.1%)
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| |-
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| |-
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| |Net Income
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| |21.4
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| |(26.7)
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| |(99.2)
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| |-
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| |Margin %
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| |1.7%
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| |(2.0%)
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| |(7.4%)
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| |}
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| == Risks == | | == Risks == |
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| == Valuation == | | == Valuation == |
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| === Comparable Analysis (Before Acquisition)<ref>https://www.capitaliq.com/CIQDotNet/Comps/Comparables.aspx?companyId=346200&statekey=2e40e3785da849c5bd1f8c40bb66289c</ref> ===
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| === Financial Data ===
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| [[File:Nuance Comps.png|thumb|1001x1001px]]
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| {| class="wikitable"
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| |Company Comp Set
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| |Company Name
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| |Shares Outstanding Latest
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| |Market Capitalization Latest
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| |LTM Net Debt
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| |Total Enterprise Value Latest
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| |LTM Tangible Book Value/Share
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| |LTM Total Revenue
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| |LTM EBITDA
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| |LTM EBIT
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| |LTM Diluted EPS Excl. Extra Items
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| |-
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| |Intel Corporation (NasdaqGS:INTC)
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| | 4,072.0
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| | 1,90,651.0
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| | 6,742.0
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| | 1,98,708.0
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| | 15.03
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| | 79,024.0
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| | 33,874.0
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| | 22,082.0
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| | 4.86
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| |-
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| |Microsoft Corporation (NasdaqGS:MSFT)
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| | 7,496.9
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| | 22,11,200.8
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| | (44,995.0)
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| | 21,66,205.8
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| | 13.55
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| | 1,84,903.0
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| | 90,830.0
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| | 78,628.0
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| | 9.39
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| |-
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| |NVIDIA Corporation (NasdaqGS:NVDA)
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| | 2,500.0
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| | 5,86,925.0
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| | (9,377.0)
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| | 5,77,404.0
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| | 7.95
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| | 26,914.0
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| | 11,215.0
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| | 10,041.0
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| | 3.85
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| |-
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| |International Business Machines Corporation (NYSE:IBM)
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| | 899.3
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| | 1,09,131.3
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| | 47,890.0
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| | 1,57,116.3
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| |( 54.84)
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| | 57,351.0
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| | 12,189.0
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| | 5,772.0
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| | 5.21
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| |Nuance Communications, Inc.
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| | 319.4
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| | 17,735.5
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| | 855.2
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| | 18,590.7
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| |( 2.18)
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| | 1,338.1
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| | 133.6
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| | 45.4
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| |( 0.27)
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| |}
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| {| class="wikitable"
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| |Summary Statistics
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| |Shares Outstanding Latest
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| |Market Capitalization Latest
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| |LTM Net Debt
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| |Total Enterprise Value Latest
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| |LTM Tangible Book Value/Share
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| |LTM Total Revenue
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| |LTM EBITDA
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| |LTM EBIT
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| |LTM Diluted EPS Excl. Extra Items
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| |-
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| |High
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| | 7,496.9
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| | 22,11,200.8
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| | 47,890.0
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| | 21,66,205.8
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| | 15.03
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| | 1,84,903.0
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| | 90,830.0
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| | 78,628.0
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| | 9.39
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| |Low
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| | 899.3
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| | 1,09,131.3
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| | (44,995.0)
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| | 1,57,116.3
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| |( 54.84)
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| | 26,914.0
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| | 11,215.0
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| | 5,772.0
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| | 3.85
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| |-
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| |Mean
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| | 3,742.0
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| | 7,74,477.0
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| | 65.0
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| | 7,74,858.5
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| |( 4.58)
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| | 87,048.0
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| | 37,027.0
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| | 29,130.8
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| | 5.83
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| |-
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| |Median
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| | 3,286.0
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| | 3,88,788.0
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| | (1,317.5)
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| | 3,88,056.0
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| | 10.75
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| | 68,187.5
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| | 23,031.5
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| | 16,061.5
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| | 5.03
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| |}
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| We can see that in terms of market cap and revenue, Nuance is far below the median and mean of its competitors.
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| === Trading Multiples ===
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| [[File:Trading multiples.png|thumb|998x998px]]
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| {| class="wikitable"
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| |Company Comp Set
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| |Company Name
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| |TEV/Total Revenues LTM - Latest
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| |TEV/EBITDA LTM - Latest
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| |TEV/EBIT LTM - Latest
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| |P/Diluted EPS Before Extra LTM - Latest
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| |P/TangBV LTM - Latest
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| |NTM TEV/Forward Total Revenue (Capital IQ)
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| |NTM TEV/Forward EBITDA (Capital IQ)
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| |NTM Forward P/E (Capital IQ)
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| |-
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| |Intel Corporation (NasdaqGS:INTC)
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| |2.5x
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| |5.7x
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| |9.0x
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| |9.6x
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| |3.1x
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| |2.63x
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| |6.71x
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| |13.44x
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| |-
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| |Microsoft Corporation (NasdaqGS:MSFT)
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| |11.7x
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| |23.3x
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| |27.6x
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| |31.4x
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| |21.8x
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| |10.19x
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| |20.40x
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| |29.86x
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| |-
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| |NVIDIA Corporation (NasdaqGS:NVDA)
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| |21.5x
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| |50.7x
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| |57.5x
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| |61.0x
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| |29.5x
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| |16.67x
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| |38.33x
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| |41.89x
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| |-
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| |International Business Machines Corporation (NYSE:IBM)
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| |2.7x
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| |11.5x
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| |27.2x
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| |23.3x
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| |NM
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| |2.59x
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| |9.34x
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| |12.10x
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| |-
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| |Nuance Communications, Inc.
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| |13.9x
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| |116.6x
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| |NM
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| |NM
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| |NM
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| |12.38x
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| |43.18x
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| |79.18x
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| |}
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| {| class="wikitable"
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| |Summary Statistics
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| |TEV/Total Revenues LTM - Latest
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| |TEV/EBITDA LTM - Latest
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| |TEV/EBIT LTM - Latest
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| |P/Diluted EPS Before Extra LTM - Latest
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| |P/TangBV LTM - Latest
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| |NTM TEV/Forward Total Revenue (Capital IQ)
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| |NTM TEV/Forward EBITDA (Capital IQ)
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| |NTM Forward P/E (Capital IQ)
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| |-
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| |High
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| |21.5x
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| |50.7x
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| |57.5x
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| |61.0x
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| |29.5x
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| |16.67x
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| |38.33x
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| |41.89x
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| |-
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| |Low
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| |2.5x
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| |5.7x
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| |9.0x
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| |9.6x
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| |3.1x
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| |2.59x
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| |6.71x
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| |12.10x
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| |-
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| |Mean
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| |9.6x
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| |22.8x
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| |30.3x
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| |31.3x
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| |18.1x
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| |8.02x
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| |18.70x
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| |24.32x
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| |-
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| |Median
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| |7.2x
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| |17.4x
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| |27.4x
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| |27.4x
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| |21.8x
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| |6.41x
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| |14.87x
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| |21.65x
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| |}
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| The TEV/Total Revenues multiple reflects whether a company overvalues or undervalues or its stocks or whether its valuation is fair. If a company's theoretical enterprise value is high in proportion to its actual revenue, its ratio is large, meaning it's overvalued. The lower the better, in that, a lower EV/R multiple signals a company is undervalued. From the above data we can come to the conclusion that Nuance is overvalued relative to its competitors.
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| Nuance also has a higher TEV/EBITDA . A high EV/EBITDA means that there is a potential the company is overvalued.The enterprise value to earnings before interest, taxes, depreciation, and amortisation ratio (TEV/EBITDA) compares the value of a company—debt included—to the company’s cash earnings less non-cash expenses.
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| === At the time of Acquisition<ref>https://www.hcinnovationgroup.com/analytics-ai/artifical-intelligence-machine-learning/article/21218486/stock-market-analysts-observers-react-to-microsofts-acquisition-of-nuance</ref> ===
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| The day after Microsoft announced its plans to acquire Nuance, Microsoft stock had risen 6 cents to $255.91, while “Nuance stock blasted 16 percent higher to $52.85,” Seitz reported.
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| When a company purchases another, it is common for the stock price of the acquiring company to experience a temporary decline, while the stock price of the target company tends to surge. The decline in the acquiring company's share price is often due to paying a higher price than usual for the target company or taking on debt to fund the acquisition. Microsoft did acquire Nuance for $56.00 per share, which was a 23% premium to the closing price of Nuance on Friday, April 9 2021, in an all-cash transaction valued at $19.7 billion, inclusive of Nuance’s net debt.
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| However, in the long term, acquisitions generally have a positive impact on the acquiring company's share price.
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| == References == | | == References == |