Rumored Samsung Takeover Of Nuance (NUAN) Makes Sense, Oppenheimer Says

Oppenheimer analyst Shaul Eyal weighed in on Nuance Communications (NASDAQ: NUAN) amid recent reports that private equity firms and Samsung held strategic discussion with the company. Eyal focused on Samsung as a strategic buyer, saying the company should have a interest in Nuance Healthcare (47%), Consumer/Mobile (25%) and Imaging (12%) segments as these are all growth areas that could complement and expand Samsung's customer base and product reach.

Eyal said while it is common to think of Samsung as a direct comp to Apple, there is a lot more to the company. Samsung's business arms span from mobile to industrial, healthcare, consumer, and more. In FY13, Samsung's overall revenue was ~$209B (up 17% YoY).

Commenting on pros to a Samsung takeover of Nuance, the analyst highlighted:

• Samsung's healthcare business (focus on radiology) generated $300M of revenue in FY12 and was expected by the company to grow to $500M in FY13 (driven by acquisitions). NUAN's HC segment could not only add $1B in FY15 revenue but could also expand Samsung's customer base.
• NUAN's mobile division is a good match for Samsung's consumer (handsets, tablets, SmarTVs) segment, in our view. In addition, NUAN brings a plethora of IP in the form of 2,400 patents and 1,500 in the application process.

On cons to a potential deal, Eyal notes Samsung has yet to pursue such a sizable strategic investment and it appears to be focusing more on tuck-in types of acquisitions in core markets.

Outperform price target of $22.00

For an analyst ratings summary and ratings history on Nuance Communications click here. For more ratings news on Nuance Communications click here.

Shares of Nuance Communications closed at $18.77 yesterday.

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