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Letter to Nuance Dictaphone Healthcare Solutions customers

eScription web site

Complete press release

Nuance to Acquire eScription, Streamline Clinical Documentation Process to Save Healthcare Industry More Than $1 Billion by 2011

Acquisition Brings Award Winning Medical Transcription Solutions, Strong Customer Base and Recurring Revenue, and Margin Expansion from On-Demand, Software-as-a-Service Offerings

BURLINGTON, Mass., April 8, 2008 — Nuance Communications, Inc. (NASDAQ: NUAN) today announced that it has signed an agreement to acquire eScription, a leading provider of computer aided medical transcription technology. By uniting the strengths and resources of Nuance and eScription, the combined organization can deliver scalable, highly productive solutions, as well as accelerate future innovation to transform the way healthcare provider organizations document patient care.

Spiraling costs across the healthcare industry, a shrinking pool of domestic medical transcriptionists (MTs) and mounting regulations for electronic clinical documentation are driving healthcare provider organizations to reevaluate the way they create and manage medical reports. With an estimated $7 billion spent on medical transcription in North America each year, the acquisition of eScription will accelerate Nuance’s ability to effectively serve the industry with advanced transcription solutions and future innovations such as structured reporting that will facilitate highly productive, cost-efficient and data-driven clinical documentation of every patient encounter.

“In 2005, Nuance set forth to transform the nation’s stagnant healthcare documentation process through speech-enabled solutions and has since seen rapid growth within our healthcare business. eScription’s strengths in computer aided medical transcription workflow will accelerate our delivery of solutions that improve the way patient data is captured, processed and used,” said Paul Ricci, chairman and CEO at Nuance. “We’re committed to helping the healthcare industry initiate change through technologies that streamline the way medical reports are created. The combined company will focus on continued innovation to evolve healthcare documentation and lower transcription costs in excess of $1 billion in the next few years.”

“Nuance has experienced robust demand for its on-demand, hosted healthcare solution, iChart, in recent years, with growth in the range of 30 to 40 percent,” commented Robert Wise, president of Nuance’s Healthcare division. “eScription’s exclusive focus on building a highly efficient, scalable on-demand platform will allow Nuance to more completely address the continuing demand in this recurring revenue model. We anticipate that combined revenues for our on-demand medical transcription and clinical documentation solutions will be between $175 million and $200 million in fiscal 2009.”

Nuance expects the acquisition to add between $16.0 million and $18.0 million in non-GAAP revenue in fiscal 2008 and between $63.0 million and $68.0 million in fiscal 2009. Adjusting for revenue lost to purchase accounting, Nuance expects GAAP revenue from eScription between $13.0 million and $15.0 million in fiscal 2008 and $56.5 million and $61.5 million in fiscal 2009. On a non-GAAP basis, the acquisition is expected to be accretive to earnings, excluding amortization, stock-based compensation and non-cash taxes, by approximately $0.00 to $0.01 per diluted share in fiscal 2008 and $0.06 to $0.08 cents per diluted share in fiscal 2009. On a GAAP basis, the acquisition is expected to result in dilution between $(0.08) and $(0.09) per basic share in fiscal 2008 and between $(0.15) and $(0.16) per diluted share in fiscal 2009. See “Discussion of non-GAAP Financial Measures” and “GAAP to non-GAAP Reconciliation” below for further information on the Company’s non-GAAP measures.

Under the terms of the agreement, total consideration for the transaction is approximately $363 million and comprises $340 million in cash and $23 million in Nuance common stock, plus the assumption of vested employee options with a value of approx $37 million. The transaction is expected to close in Nuance’s fiscal third quarter 2008 and is subject to customary closing conditions and regulatory approvals.

In connection with the transaction, Warburg Pincus, the global private equity firm and a leading investor in technology companies, has agreed to purchase 5,760,369 shares of Nuance common stock at a purchase price of $17.36 per share, the closing price on Friday, April 4, 2008, for an aggregate investment of $100 million. In addition, Warburg Pincus will acquire a warrant to purchase 3.7 million shares of Nuance common stock upon the closing of the investment. The warrant has an exercise price of $20.00 per share and a four-year term. Warburg Pincus has also agreed not to sell any shares of Nuance common stock for a period of six months from the closing of the transaction. This transaction will close concurrent with, and is contingent upon, the closing of the eScription acquisition.

eScription, founded in 1999 and headquartered in Needham, Massachusetts, is one of the pioneers and leaders in computer aided medical transcription technology. When medical transcriptionists – whether working in-house or for an outsourced Medical Transcription Service Organization (MTSO) – use eScription’s software for computer-aided medical transcription instead of manual typing, their productivity levels rise significantly. The enterprise-wide software enables healthcare organizations to shorten turnaround time, improve processes, and achieve substantial cost savings in medical transcription.

“There is a large and growing market for technologies and services that enable the healthcare industry to deliver higher levels of patient care and reduce costs through automation. By teaming with Nuance, we can accelerate the realization of our common vision to provide highly efficient, cost-effective solutions for advanced end-to-end clinical documentation,” said Paul Egerman, Co-CEO of eScription. “Since our inception, eScription has focused on improving the medical transcription process, and we believe that with Nuance, we can bring our award-winning software and services to a broader market and expand upon the benefits we deliver to our customers.”

Ben Chigier, Co-CEO of eScription, added, “By focusing on tangible value for our customers we have enabled healthcare organizations to significantly reduce transcription costs through improved medical transcription workflow that reliably has reduced the average turnaround time of dictated-to-transcribed reports from one week to less than 24 hours across our entire customer base. Because of our laser focus on medical transcription and its associated results, eScription has experienced attractive, profitable growth in its short history. By joining forces with Nuance’s Dictaphone Healthcare division, we believe that we can advance the combined company’s delivery of breakthrough capabilities to the overall healthcare market.”

The addition of eScription brings many advantages and synergies that are expected to complement Nuance’s presence in the medical transcription market, as well as accelerate the development of future solutions that can improve the healthcare documentation process:

• Attractive Software-as-a-Service Solutions — The eScription acquisition brings to Nuance an award winning on-demand transcription solution that has achieved proven success within major reference accounts and delivers a predictable, recurring revenue stream derived from a software-as-a-service (SaaS) business model. With the addition of eScription, Nuance anticipates that its total on-demand healthcare revenues will be in the range of $175 million to $200 million in fiscal 2009.
• Robust Financial Performance — The Dictaphone Healthcare division has been a significant catalyst of growth for Nuance. This acquisition provides Nuance with additional technology to deliver high levels of transcription productivity, reliability and scale to accelerate growth in the fertile market of clinical documentation.
• Enhanced Outsourced Speech Editing Services — By complementing Dictaphone’s preferred MTSO partners with those from eScription’s MTSO Alliance Program, healthcare provider organizations will have an increased array of options for the rapidly growing market of speech editing and transcription services at highly competitive prices.
• Strong Customer Base and Client Satisfaction — eScription has deployed its solutions across leading healthcare provider organizations including Beth Israel Deaconess Medical Center (Boston, MA), Carle Clinic (Urbana, IL), Health Alliance (Cincinnati, OH), Maine Medical Center (Portland, ME), and Poudre Valley Health System (Fort Collins, CO). eScription’s strong customer satisfaction is represented by industry recognition from KLAS Enterprises with a #1 ranking and Best in KLAS award for the past four consecutive years.
• Talented and Motivated Employees — eScription brings a dedicated, talented team of professionals whose healthcare knowledge and expertise has established eScription as a premier provider of computer aided medical transcription solutions.

Investor Conference Call Information

In conjunction with this announcement Nuance will broadcast a conference call over the Internet today at 9:00 a.m. ET. Those who wish to listen to the live broadcast should visit the Investor Relations section of the Nuance Web site at least 15 minutes prior to the event and follow the instructions provided to ensure that the necessary audio applications are downloaded and installed. The conference call can be heard live by dialing (866) 861-5393 or (612) 288-0340 five minutes prior to the call and reference conference code 918775. A replay of the call will be available within 24 hours of the announcement. To access the replay, dial (800) 475-6701 or (320) 365-3844 and refer to access code 918775.

eScription, Inc.

eScription, Inc. is the pioneer and leader in Computer Aided Medical Transcription. The company's software, including patented technology, is based on the simple premise that it is faster to edit than to type. With its products deployed enterprise-wide at healthcare organizations throughout the United States, eScription is helping streamline processes, speed turnaround time, and save costs of medical transcription, without interfering with clinician workflow.

Nuance’s Dictaphone Healthcare Division

Dictaphone Healthcare Solutions, a division of Nuance Communications, provides a comprehensive family of speech-driven clinical documentation and communications solutions. Dictaphone® solutions orchestrate and optimize clinical workflow, reduce transcription expense, raise standards of care via more thorough documentation, deliver results rapidly to meet patient safety guidelines, and heighten clinician satisfaction by making EMR systems easy to use. For more information, please visit www.nuance.com/dictaphone/.

Nuance Communications, Inc.

Nuance Communications, Inc. (NASDAQ: NUAN) is a leading provider of speech and imaging solutions for businesses and consumers around the world. Its technologies, applications and services make the user experience more compelling by transforming the way people interact with information and how they create, share and use documents. Every day, millions of users and thousands of businesses experience Nuance’s proven applications. For more information, please visit www.nuance.com.

Nuance and eScription were represented by Thomas Weisel Partners LLC and Jefferies & Company, Inc., respectively.

Trademark reference: Nuance, the Nuance logo and Dictaphone are registered trademarks or trademarks of Nuance Communications, Inc. or its affiliates in the United States and/or other countries. All other company names or product names referenced herein may be the property of their respective owners.

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