PEABODY, Mass.,-July 2, 2001 - ScanSoft, Inc. (Nasdaq: SSFT), a leading provider of paper-to-digital solutions, today announced a significant improvement in its cash position. For the quarter ended June 30, 2001, ScanSoft will report ending cash balances of approximately $7.5 million and no bank debt. The Company began the quarter with $2.8 million in cash and short-term bank debt of $2.6 million.

Commenting on the improvement in the second quarter, CFO Richard Palmer said, "With our business continuing to be cash flow positive and with the proceeds we received from the State of Wisconsin Investment Board, we experienced a positive net cash improvement of more than $7.0 million during the quarter." On April 27, 2001, ScanSoft announced that its largest institutional shareholder, the State of Wisconsin Investment Board (SWIB), had invested $5 million in the company in exchange for 4.76 million shares of ScanSoft common stock. "This news should fully allay the concern's of investors that were expressed at year-end," added Palmer. "ScanSoft's strengthened balance sheet better supports the accomplishment of our strategic objectives."

ScanSoft will report its second quarter 2001 financial results before the opening of the market on Tuesday, July 31, 2001. In conjunction with that announcement, the company will conduct its quarterly conference call at 10:00 a.m. (ET) July 31. To listen to the call, please telephone (719) 457-2692 approximately ten minutes beforehand. For those who are not available to listen to the live conference call, a replay will be available via telephone starting approximately at 2:00 p.m. Eastern Time on July 31st until 11:30 p.m. Eastern Time on August 2nd. The access number for the replay is (719) 457-0820 or (888) 203-1112; confirmation number 438298.

About ScanSoft, Inc.

Headquartered in Peabody, Mass., with European headquarters in The Netherlands, ScanSoft, Inc. (Nasdaq: SSFT) is a global leader in paper-to-digital solutions for the desktop, network, Internet and mobile environments that enable users to leverage the power of their scanners, digital cameras and other electronic devices. ScanSoft's award-winning product line - OmniPage Pro, TextBridge Pro, PaperPort Deluxe, Pagis Pro, OmniForm, eOmniForm, and numerous software developer's kits, enables users to capture, recognize, edit, manage and share documents and photos electronically by taking advantage of ScanSoft's cutting-edge technology.

ScanSoft has established numerous strategic partnerships with the industry's leading scanner and multifunction vendors to deliver the most comprehensive and cost-effective solutions for its customers. Vendors who have chosen ScanSoft's cutting-edge products and technologies include Brother, Canon, Epson, Fujitsu, Hewlett-Packard, IBM/Lotus, Mustek, Primax, Sharp, Symantec Corporation, Visioneer, Xerox and others. ScanSoft's leading technologies have been licensed by Microsoft for use in Office XP and other future products.

ScanSoft software is sold, marketed and supported worldwide through retail, dealer and OEM channels and the Internet, capturing the small to medium size business and corporate markets. There are more than 8 million registered users of ScanSoft products. ScanSoft can be found on the Web at www.scansoft.com.

Trademark reference: ScanSoft, OmniPage, TextBridge, PaperPort, PaperPort Deluxe, Pagis, OmniForm, eOmniForm, Direct OCR and Developer’s Kit 2000 are registered trademarks or trademarks of ScanSoft, Inc., in the United States and/or other countries. All other trademarks and trade names are hereby recognized and may be registered to their respective holders.

Safe Harbor Statement

Except for the historical information contained herein, the matters set forth in this press release, including, but not limited to, statements as to the features and perceived benefits of ScanSoft’s OCR engine and OmniPage Pro, are forward-looking statements within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the market acceptance of ScanSoft’s OCR engine and OmniPage Pro, the impact of competitive products, 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.

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