February 2, 2016 10:56 pm

Microsoft steps up AI push with Swiftkey deal

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British theoretical physicist professor Stephen Hawking gives a lecture during the Starmus Festival on the Spanish Canary island of Tenerife on September 23, 2014. AFP PHOTO / DESIREE MARTIN (Photo credit should read DESIREE MARTIN/AFP/Getty Images)©AFP

Swiftkey has developed a technology that helps Stephen Hawking write and talk

Microsoft has acquired London-based Swiftkey, maker of a predictive keyboard powered by artificial intelligence that is installed on hundreds of millions of smartphones, in a deal worth $250m.

Jon Reynolds and Ben Medlock, who founded the company in 2008 when both were in their 20s, will each make upwards of $30m from the buyout.

The pair together own a substantial minority stake in the company after raising just over $20m, a relatively small amount of venture capital, from backers including Accel Partners, Index Ventures and Octopus Investments.

Swiftkey and Microsoft confirmed the deal on Wednesday, but did not reveal financial details. People familiar with the matter told the Financial Times that the US group paid $250m.

The start-up is the latest in a string of UK companies with advanced artificial-intelligence capabilities to be snapped up by Silicon Valley.

In 2014, Google paid £400m for DeepMind, which then acquired Dark Blue Labs and Vision Factory, two spinouts from the University of Oxford. Last year, Apple acquired VocalIQ, whose AI software helps computers and people converse more naturally.

A person close to the deal said: “There’s a war for talent in artificial intelligence — and companies like Google and Microsoft recognise the best talent is in the UK.”

Swiftkey’s team will join Microsoft Research to work under the division’s chief Harry Shum.

“This acquisition is a great example of Microsoft’s commitment to bringing its software and services to all platforms,” he said. “We believe that together we can achieve orders of magnitude greater scale than either of us could have achieved independently.”

Swiftkey is available for iOS and Android devices but not Windows phones. Mr Shum said Microsoft is likely to integrate Swiftkey’s technology across its software, such as Windows.

Jon Reynolds and Ben Medlock, founders of Swiftkey

Swiftkey founders Jon Reynolds and Ben Medlock

In a blogpost confirming the deal that was published on Wednesday, Mr Reynolds and Mr Medlock said: “Eight years ago we started out as two friends with a shared belief that there had to be a better way of typing on smartphones. We’ve come a long way since then.”

For Microsoft, the purchase is the latest step in chief executive Satya Nadella’s plan to regain a foothold in mobile by acquiring popular productivity apps. In little more than a year, Microsoft has spent hundreds of millions of dollars to buy Acompli, an email app, Wunderlist, maker of to-do list software, and Sunrise, a calendar app.

The $250m price makes the deal one of the biggest recent exits for a UK-based tech company. According to its most recent annual report, filed at the end of 2014, Swiftkey — which is incorporated as TouchType — had sales of £8.4m.

But one person close to the company said the price was lower than investors might have hoped for a couple of years ago, when Swiftkey was among the most popular smartphone apps in the world.

Fear must not hold back AI

British theoretical physicist professor Stephen Hawking gives a lecture during the Starmus Festival on the Spanish Canary island of Tenerife on September 23, 2014. AFP PHOTO / DESIREE MARTIN (Photo credit should read DESIREE MARTIN/AFP/Getty Images)

Ben Medlock, whose company used AI to help Stephen Hawking, hails the opportunities it will bring.

Read more

Despite being installed on more than 300m devices, Swiftkey has struggled to find a reliable business model. After initially selling its predictive keyboard app for $4, the company switched to a free download model in 2014, selling extras such as themes and personalisation via in-app purchases. The company also earned revenues from smartphone makers such as Samsung and BlackBerry, which pre-installed the app on their devices.

Swiftkey’s technology suggests the next word a user is about to type based on analysis of their writing style. The company says its technology learns slang, nicknames and even which emojis its users prefer.

Last October, Swiftkey announced that its Android keyboard supports more than 100 languages, including Arabic, Icelandic, Welsh and several Chinese and Indian dialects.

Swiftkey’s technology is also used by astrophysicist Stephen Hawking, who has motor neurone disease. The company developed a special language model to assist Professor Hawking in speaking and writing his lectures and articles.

Mr Reynolds, a natural sciences graduate and former civil servant, met Mr Medlock while they were studying at Cambridge. Mr Medlock holds a doctorate in natural language and information processing.

Swiftkey has more than 150 employees in London, San Francisco and Seoul.

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