ScanSoft Posts Record First Quarter Revenue

Strong International Performance and Record Speech Revenue in All Products Drive 17% Year-Over-Year Growth

Reading, UK, May 6, 2003 - ScanSoft, Inc. (Nasdaq: SSFT), a leading supplier of digital imaging, speech and language solutions, today announced financial results for the first quarter ended March 31, 2003.

ScanSoft reported first quarter 2003 revenue of $27.8 million, a 17 percent increase over first quarter 2002 revenue of $23.8 million. Net income before amortization of acquisition-related intangible assets and restructuring charges was $3.0 million, or $0.04 per diluted share, compared with $2.7 million, or $0.04 per diluted share, for the first quarter of 2002. After including amortization of acquisition-related intangibles and restructuring charges, ScanSoft reported first-quarter 2003 net income of $0.1 million, or breakeven per diluted share, compared with a first-quarter 2002 net loss of $2.9 million, or $0.05 per diluted share.

During the first quarter, the company substantially completed the consolidation of facilities and personnel following the closing of the Philips Speech Processing acquisition. As a result, in the first quarter of 2003, ScanSoft recorded associated restructuring charges totaling approximately $0.5 million.

Comments on the First Quarter

"ScanSoft began 2003 with record first quarter revenue, driven by strong performance throughout our speech business and continued growth across international channels, which offset some weakness in our North American capture business," said Paul Ricci, ScanSoft's chairman and CEO. "In the first quarter we continued to see the benefits of our performance in on-time product delivery, our investments in international sales channels and our broadening portfolio of speech solutions."

During the quarter, ScanSoft experienced robust growth in each of its speech segments, including dictation, network telephony and embedded solutions. The company launched new versions of the Dragon NaturallySpeaking product family in domestic and international channels. The Dragon NaturallySpeaking launch will continue as the company introduces solutions for medical and legal markets and international editions for six languages. In addition, ScanSoft continued to enhance its award-winning RealSpeak product offerings and speech recognition engines with additional language and platform support. During the quarter, the company signed a host of agreements for its telephony-based speech solutions, particularly in international markets, with partners and customers including Belgacom, KPN, InterTel and NTT DoCoMo.

In addition, the company signed a series of agreements with IBM that extend the companies' speech technology and applications across enterprise, desktop and multimodal environments. The agreements encompass dictation, text-to-speech and telephony applications through which IBM will assist ScanSoft in porting its telephony-based applications to the IBM WebSphere Platform; IBM has expanded its license agreement for ScanSoft RealSpeak TTS to include 20 languages; and IBM has awarded ScanSoft global distribution rights for IBM ViaVoice desktop dictation products.

Within imaging, ScanSoft launched new versions of its award-winning digital paper management product, PaperPort, adding PDF creation and other valuable document automation features. With the new release, ScanSoft now offers two versions - an Office edition designed to optimize the capabilities of networked MFP devices and address growing demand for distributed paper management solutions; and a Deluxe edition designed specifically for small office users and consumers. Even though the company launched PaperPort near the end of the quarter, ScanSoft achieved a record quarter for PaperPort and completed its most successful upgrade program ever. Also in the first quarter, the company signed new or expanded license agreements with companies such as Freedom Scientific, Kyocera Mita, Lexmark and Xerox and expanded relationships with a number of federal agencies, including several defense organizations.

International sales accounted for approximately 33 percent of total company revenue for the first quarter 2003. ScanSoft ended the quarter with cash balances of $20.3 million.

Comments on the Philips Speech Processing Acquisition On January 30, 2003, ScanSoft closed the acquisition of the Speech Processing Telephony and Voice Control business units and related intellectual property from Royal Philips Electronics (NYSE: PHG, AEX: PHI). With the acquisition of the Philips business units complete, ScanSoft will leverage this technology into broader penetration and increased market share in the high-growth automotive, embedded and telephony markets.

Comments on the SpeechWorks Acquisition

Subsequent to the close of the first quarter, on April 24, 2003, ScanSoft and SpeechWorks International (NASDAQ: SPWX) announced a definitive agreement for ScanSoft to purchase all of the outstanding common stock of SpeechWorks. The combination of ScanSoft and SpeechWorks will result in a global organization with the broadest portfolio of speech technologies, applications and services in the industry. The transaction has been approved unanimously by both Boards of Directors and is expected to close by August 1, 2003, pending regulatory and shareholder approvals.

Business Outlook

"ScanSoft's early success in 2003 is largely the result of our continued emphasis on product delivery and international expansion," added Ricci. "Notwithstanding the ongoing weakness in general IT and corporate spending, the strength of our speech business and growth in international markets gives us confidence to affirm our 2003 guidance."

In 2003, the company expects revenue in the range of $135 million to $140 million in revenue. Earnings per diluted share, before acquisition-related amortization and restructuring charges, are expected to be in the range of $0.33 to $0.35. After acquisition-related amortization and restructuring charges, the company expects 2003 earnings per diluted share to be in the range of $0.20 to $0.22. The company will provide additional estimates associated with the SpeechWorks agreement upon closing the transaction.

Investor Call

In conjunction with this announcement, the company will conduct its quarterly conference call at 1:30 p.m. (GMT) today, May 6, 2003. ScanSoft's first-quarter conference call also can be heard live by dialing +1 719 457-2617 or +1 800 231-9012 five minutes prior to the call. A replay of the call will be available beginning at 7:00 p.m. (GMT) on Tuesday, May 6, 2003, through 4:30 a.m. (GMT) on Tuesday, May 13, 2003. To access the replay, dial +1 888 203-1112 or +1 719 457-0820 and refer to confirmation code 649137.

The conference call will also be broadcast live over the Internet. Investors interested in listening to the call should log onto the company's Web site at www.scansoft.com at least 10 minutes prior to the broadcast. Investors will also have access to an archived version of the call on the company's Web site.

About ScanSoft, Inc.

ScanSoft, Inc. (Nasdaq: SSFT) is the leading supplier of imaging, speech and language solutions that are used to automate a wide range of manual processes - saving time, increasing worker productivity and improving customer service. For more information regarding ScanSoft products and technologies, please visit www.scansoft.com.

Trademark reference: ScanSoft, the ScanSoft logo, Dragon NaturallySpeaking, OmniPage Pro, RealSpeak, and PaperPort are registered trademarks or trademarks of ScanSoft, Inc. in the United States and other countries. All other company or product names mentioned may be the trademarks of their respective owners.

Additional Information and Where to Find It
In connection with ScanSoft's proposed acquisition of SpeechWorks, ScanSoft intends to file a registration statement on Form S-4. Further, ScanSoft and SpeechWorks intend to file with the SEC and mail to their respective stockholders a joint proxy statement/prospectus in connection with the transaction. Investors and security holders are urged to read the joint proxy statement/prospectus when it becomes available because it will contain important information about ScanSoft, SpeechWorks and the transaction. Investors and security holders may obtain a free copy of the joint proxy statement/prospectus (when it is available) at the Securities and Exchange Commission's web site at www.sec.gov. A free copy of the joint proxy statement/prospectus may also be obtained by contacting ScanSoft or SpeechWorks.

ScanSoft and its directors and executive officers may be deemed to be participants in the solicitation of proxies from the stockholders of ScanSoft and SpeechWorks in connection with the transaction described herein. Information regarding the special interests of these directors and executive officers in the transaction described herein will be included in the joint proxy statement/prospectus described above. Additional information regarding these directors and executive officers is also included in ScanSoft's proxy statement for its 2002 Annual Meeting of Stockholders, which was filed with the Securities and Exchange Commission on or about April 30, 2002. This document is available free of charge at the Securities and Exchange Commission's web site at www.sec.gov and from ScanSoft.

This press release and the reconciliation contained herein, disclose certain financial measures that exclude acquisition-related amortization and restructuring charges that may be considered non-GAAP financial measures. Generally a non-GAAP financial measure is a numerical measure of a company's performance, financial position, or cash flows that either excludes or includes amounts that are not normally excluded or included in the most directly comparable measure calculated and presented in accordance with generally accepted accounting principles in the United States. These non-GAAP financial measures are provided to enhance the user's overall understanding of ScanSoft's current financial performance and ScanSoft's prospects for the future. Management believes that these measures present a more representative measure of ScanSoft's operating performance because they exclude the impact of acquisition-related amortization and restructuring charges. These measures, however, should be considered in addition to, and not as a substitute for, or superior to, other measures of financial performance prepared in accordance with generally accepted accounting principles. The non-GAAP measures included in our press release have been reconciled to the nearest GAAP measure.

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