ScanSoft Announces Fourth Quarter and Full Year 1999 Results

Peabody, MA, February 3, 2000 - ScanSoft, Inc. (NASDAQ: SSFT) today announced revenue for the year ended December 31, 1999 of $31.6 million and net income of $2.6 million (before unusual items and goodwill amortization), or $0.08 per share on a diluted basis, which is the highest annual income ever recorded by the company. Including the effects of unusual items and goodwill amortization, the company reported a net loss of $2.7 million, or $0.11 per diluted share, for the year ended December 31, 1999.

"1999 was a year of substantial transition for us. The company acquired ScanSoft from Xerox Corporation, sold its hardware business to Primax Electronics, and changed its name. Today, ScanSoft has become a leading digital imaging software provider and, for the first time in the company's history, reported an annual operating profit, excluding acquisition-related charges," said Michael K. Tivnan, ScanSoft's president and CEO.

For the fourth quarter of 1999, ScanSoft reported revenue of $8.6 million and net income of $636,000 (before goodwill amortization), or $0.02 per diluted share. Including the effects of goodwill amortization, the company reported a net loss of $19,000, or $0.00 per diluted share, for the fourth quarter ended December 31, 1999.

Revenue from ScanSoft's North American channel for the fourth quarter of 1999 grew 79% over the third quarter of 1999, due primarily to significantly higher same-store sales from the company's current resellers and continued expansion of its retail channel, which now includes Wal-Mart. Revenue from ScanSoft's European channel for the fourth quarter of 1999 increased by 55% over the third quarter of 1999 as a result of the company's expanded relationship with AOL in Europe, additional German retail stores, and the continued growth of Dixon's Store Group that carries ScanSoft's products in the U.K. ScanSoft's total revenue for the fourth quarter of 1999, however, was impacted by the timing of a renewal of a key OEM agreement, as well as a slower start for the company's new photo imaging products, particularly its PhotoFactory photo editing suite, which faced fierce price competition during the holiday season.

"Looking forward, we will continue to pursue strategic opportunities for increasing long-term shareholder value," added Mr. Tivnan. "For example, in November, Microsoft licensed our TextBridge optical character recognition (OCR) technology for use in their future products, and ScanSoft's TextBridge and Pagis products now carry a label indicating that they contain the OCR engine licensed by Microsoft. Also in November, as a result of ScanSoft's collaboration with Hewlett-Packard, we announced that our award-winning Pagis Pro product will be the first digital imaging suite to offer HP's JetSend device-to-device communications protocol. In December, Xerox Corp. agreed to bundle ScanSoft's TextBridge and PaperPort products with new models of their Document Centre multifunction peripherals (MFPs) for the corporate market. We also extended our OEM relationship with Visioneer/Primax until the year 2002. Additionally, in January, we completed an extensive training program and authorized Xerox Corp.'s 300 office document sales representatives in North America to sell ScanSoft software products into the corporate market.

"During the fourth quarter of 1999, we also added 560,000 new registered users, which is the largest increase to our registered base in a single quarter in the company's history. This significant rise in new registrations brings our total registered base to approximately 3 million users, which positions us well for marketing the new products and upgrades that we expect to introduce in fiscal 2000," continued Mr. Tivnan. "We ended the year with strong, well-positioned product lines, an extensive array of OEM and strategic partners, and a talented group of dedicated employees. As we move into our second full year as a software-only company, we see exciting opportunities to grow, including the pending transaction to acquire Caere Corporation announced on January 17, 2000."

About ScanSoft, Inc.
On March 2, 1999, Visioneer, a hardware and software company, acquired the ScanSoft subsidiary of Xerox Corp. The company subsequently changed its name to ScanSoft. Prior to the acquisition, Visioneer sold its hardware business to Primax Electronics, Ltd. on January 6, 1999. Revenue and costs for 1998 include these divested hardware products.

Headquartered in Peabody, MA, ScanSoft, Inc. (NASDAQ: SSFT) is a leading developer of digital imaging software that enables users to leverage the power of their scanners, digital cameras, and other electronic devices. ScanSoft's award-winning product line - Pagis Pro, TextBridge Pro, PaperPort Deluxe, Kai's Photo Soap 2, Kai's SuperGoo, Kai's Power Show, and PhotoFactory - enables users to capture, recognize, edit, manage and share documents and photos electronically by taking advantage of ScanSoft's cutting-edge technology.

ScanSoft software is sold and marketed worldwide through retail, dealer and OEM channels and the Internet, capturing the consumer, small office/home office (SOHO) and corporate markets. There are approximately 3 million registered users of ScanSoft products. For additional information, visit www.nuance.com.

Except for the historical information contained herein, this press release includes forward-looking statements within the meaning of Section 21(e) of the Securities Exchange Act of 1934. These statements are based on the company's current expectations and estimates as to prospective events and circumstances which may or may not be in the company's control and as to which there can be no firm assurances given. These forward-looking statements are subject to risks and uncertainties and there can be no assurance that any of these forward-looking statements may prove to be correct and actual results may differ materially. These risks and uncertainties include, but are not limited to, market acceptance of the company's products, competitive products, pricing pressures, maintenance of distribution channels, the completion of the Caere transaction, and other risks detailed from time to time in ScanSoft's SEC reports. ScanSoft disclaims any intent or obligation to update these forward-looking statements.

Pagis, TextBridge, PaperPort, PaperPort Deluxe, PhotoFactory, Kai's SuperGoo, Kai's Photo Soap 2 and Kai's Power Show are registered trademarks or trademarks of ScanSoft, Inc. All other trademarks are the property of their respective holders. © 2000 all rights reserved.