Microsoft and ScanSoft Reach Licensing Agreement to Enable New Document Imaging Solutions for the Asian Market

REDMOND, Wash. and PEABODY, Mass., April 18, 2001 — Microsoft Corp. (NASDAQ: MSFT), the worldwide leader in software, services and Internet technologies for personal and business computing, and ScanSoft® , Inc. (NASDAQ: SSFT), a worldwide leader in paper-to-digital solutions, today announced that Microsoft has selected ScanSoft to supply optical character recognition (OCR) technology for inclusion in the Microsoft® Office Document Imaging solution for the Asia-Pacific market.

This is the third imaging technology agreement between Microsoft and ScanSoft in the last 18 months. Both companies look forward to supporting each other’s marketing initiatives in the Asian markets. In addition, ScanSoft will bring to market enhanced versions of its software development kits (SDK’s) for systems integrators and independent software developers who require Asian OCR as part of their solutions.

Although the financial terms of the agreement remain confidential, ScanSoft is disclosing that it will recognize revenues of approximately $3 million in the first full year of the agreement. The agreement will be materially accretive to earnings in 2001.

“Microsoft’s worldwide leadership position in electronic document creation and sharing will expedite the proliferation of document imaging solutions within the Asian markets,”
said Paul Ricci, chief executive officer at ScanSoft.
“By working with Microsoft, we can quickly promote the benefits of these solutions to users around the world. By broadening the awareness of OCR technology in the Asian markets, Microsoft will also assist ScanSoft in gaining a foothold in these markets for ScanSoft’s award-winning technology.”

Analyst firm IDC reports that scanner sales in the Asia-Pacific market have increased at a rate of 26 percent from 1999 through 2000.
“The momentum in this market is expected to continue, with scanner sales forecasted to grow at a 32 percent CAGR by 2005, reinforcing the growing demand for Asian imaging solutions,”
said Ron Glaz, IDC analyst.
“These statistics indicate a significant opportunity for ScanSoft as a worldwide leader in paper-to-digital technology and acceptance of Microsoft products.”

“Through our previous agreements, ScanSoft has continuously demonstrated superior technology performance and ease of integration that meet our needs,”
said Larry Engel, product unit manager at Microsoft.
“This agreement further strengthens our relationship with ScanSoft and will enable us to expand our imaging solutions into Asian markets.”

Office Document Imaging is a new application in Microsoft Office XP, scheduled for release in the second quarter of 2001. This functionality provides users the ability to capture, index, store and find document images within the standard workflow of Office. ScanSoft’s OCR and image processing technologies enable fast, accurate indexing and small portable files to reduce storage needs and speed communications, thereby reducing bandwidth constraints.

About Microsoft Corp.

Founded in 1975, Microsoft (NASDAQ: MSFT) is the worldwide leader in software, services and Internet technologies for personal and business computing. The company offers a wide range of products and services designed to empower people through great software — any time, any place and on any device.

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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 continues to cultivate and develop strategic partnerships to deliver the most comprehensive and cost-effective solutions for its customers.

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

Trademark reference: ScanSoft, OmniPage, TextBridge, PaperPort, PaperPort Deluxe, Pagis, OmniForm, eOmniForm, and Developer’s Kit 2000 are registered trademarks or trademarks of ScanSoft, Inc., in the United States and/or other countries. Microsoft is a registered trademark of Microsoft 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.

The statements in this release that relate to future plans, events or performance, including without limitation, the perceived benefits of the agreement with Microsoft and that the agreement will be materially accretive to earnings in 2001, are forward-looking statements that reflect the Company’s current expectations, assumptions and estimates of future performance and economic conditions. The Company cautions investors that these forward looking statements involve risks and uncertainties that may cause actual results to differ materially from those expressed or implied in such forward looking statements. Such risks and uncertainties include, without limitation, risks and uncertainties associated with: development of the marketplace for Asian OCR; continued demand for the Company’s products and services; the ability of the Company’s alliances to succeed and in particular, the ability of the Company to complete product development; market acceptance and the impact of competitive products; and other risks as identified in the Company’s SEC filings. The Company disclaims any intention or obligation to publicly update these forward-looking statements to reflect events or circumstances that occur after the date hereof or to reflect the occurrence of unanticipated events.

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