Microsoft will acquire artificial intelligence and cloud computing company Nuance for $19.7 billion, bolstering the telemedicine services that became essential during the pandemic, the tech giant announced Monday.

Nuance's technology is used extensively in medical records and is currently employed in more than three-quarters of US hospitals, Microsoft said in a news release. The transaction is all-cash and the sum includes Nuance's net debt.

Nuance's technology is currently used by more than 55 percent of physicians and 75 percent of radiologists in the United States. Microsoft said the deal would double its potential healthcare market to nearly $500 billion.

"AI is technology's most important priority, and healthcare is its most urgent application," Microsoft Chief Executive Satya Nadella said.

"Together, with our partner ecosystem, we will put advanced AI solutions into the hands of professionals everywhere to drive better decision-making and create more meaningful connections, as we accelerate growth of Microsoft Cloud for Healthcare and Nuance."

This acquisition builds on the existing partnership between the two companies, which have been collaborating since 2019 in telemedicine, a sector whose growth has been spurred exponentially by Covid-19 lockdowns around the world.

Last year, the Redmond, Washington-based giant integrated Nuance Communication's Dragon Ambient eXperience program into its Teams communications software, which enables remote transcription of medical conversations.

Nuance CEO Mark Benjamin noted the increasing demand for its products in recent years.

"To seize this opportunity, we need the right platform to bring focus and global scale to our customers and partners to enable more personal, affordable and effective connections to people and care," Benjamin said in the statement. "The path forward is clearly with Microsoft."

The deal comes on the heels of Microsoft's 2016 purchase of LinkedIn for $27 billion and represents "the latest step in Microsoft's industry-specific cloud strategy," the company said.

Like other technology heavyweights, Microsoft has been a big beneficiary of the economic dislocations during Covid-19.

The company's earnings jumped by 33 percent in the latest quarter to $15.5 billion and included a boost from cloud computing and personal computing, including its Xbox video games.

Wedbush analyst Daniel Ives called the Nuance tie-up a "trophy" deal for the company founded by Bill Gates, which is on a "strategic offensive" in search of targets to purchase.

"For Nadella & Co, this is the right acquisition at the right time with Microsoft doubling down on its healthcare initiatives over the coming years," he said in an analysis. "The Nuance deal is a strategic no brainer in our opinion for MSFT and fits like a glove into its healthcare endeavors."

Based in Burlington near Boston, Nuance was founded in 1992 and specializes in conversational artificial intelligence solutions, particularly in the healthcare sector.

Nuance Communications, which employed more than 7,100 people as of September 30, reported sales of $1.48 billion last year.

Benjamin, will remain at the head of the new group, the statement said. He will report to Microsoft's executive vice president of cloud and artificial intelligence, Scott Guthrie.

Ives said Microsoft is on the hunt for more acquisitions and this deal "could be the first step in an increased appetite for deals in 2021 with Discord (video game chat community) another potential trophy for Redmond."

It comes just a few months after the takeover of ZeniMax, the parent company of video game publisher Bethesda Softworks, for $7.5 billion in September.

Media reports cite the potential for other big deals, including crafting platform Pinterest in a possible $51 billion transaction, and the popular Discord discussion platform for about $10 billion.

Shares of Nuance surged 17 percent to $53.35 in midday trading, while Microsoft edged up 0.3 percent to $256.68.

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