Nuance to Acquire Tegic Communications

Subsidiary of Time Warner and AOL to Expand Nuance’s Mobile Offerings, Enable New Mobile User Interface Converging Voice, Predictive Text and Touch Input

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Nuance Communications, Inc. (NASDAQ: NUAN) and Time Warner Inc. (NYSE: TWX) today announced that Nuance and Time Warner’s AOL LLC subsidiary have signed a definitive agreement whereby Nuance will acquire Tegic Communications Inc., a wholly owned subsidiary of AOL LLC and a developer of embedded software for mobile devices.

The transaction expands Nuance’s presence in the mobile industry and allows it to further accelerate the delivery of solutions that unlock the power of mobile devices and networks. Tegic brings industry-leading T9 predictive text input software, which has shipped on more than 2.5 billion devices, and next-generation integrated text and touch input solutions to Nuance’s portfolio of voice-enabled applications for device control, mobile search, email and text messaging. In addition, the companies share a common focus and strategy for serving the needs of their shared customers and partners within the mobile industry, including Nokia, Samsung, Sony Ericsson, LG and Motorola.

Combining Tegic’s T9 predictive text and multimodal input solutions with Nuance’s advanced speech technologies for mobile devices, the acquisition sets the stage for a new mobile user interface that combines voice, text and touch to dramatically improve the user experience for consumers and mobile professionals. Building on a partnership between Nuance and Tegic established in 2005, Nuance intends to deliver an all-in-one interface that integrates Nuance and Tegic solutions to support predictive text, speech and touch input. This multimodal interface will provide easier access for users of mobile devices and will be available to all manufacturers across their product lines.

“The enhanced capabilities of mobile devices and networks have fueled significant innovation in features and services, but their potential has been tempered by the traditional interface on most mobile devices,” said Paul Ricci, chairman and CEO, at Nuance. “Tegic shares our vision of delivering an integrated, superior and flexible user experience for today’s wireless subscribers. Together, we are poised to redefine the way people interact with their mobile devices, delivering a more convenient, simple way for consumers to control features and access information on their phones, and search and navigate the mobile Web.”

In its fiscal year 2008, Nuance expects Tegic to contribute between $65 million and $68 million in non-GAAP revenue; $45 million and $48 million in GAAP revenue; a GAAP loss between $0.12 and $0.13 per share; and non-GAAP earnings between $0.04 and $0.05 per diluted share. The combination is expected to generate approximately $8 million to $10 million in cost synergies in fiscal year 2008. Under the terms of the agreement, total consideration is approximately $265 million in cash. The transaction is expected to close in Nuance’s fiscal fourth quarter and is subject to customary closing conditions and regulatory approvals.

Time Warner Inc. Chairman and CEO Dick Parsons said: “AOL’s sale of Tegic marks yet another step in our overall strategy of focusing on our core assets to drive profitable growth for our shareholders. As AOL continues to make impressive progress, it’s more important than ever that AOL’s resources are fully aligned behind growing its worldwide advertising businesses.”

AOL Chairman and CEO Randy Falco said: “We believe that Nuance is a good match for Tegic, its employees and its business partners, and we value our relationships with both companies. This sale also lets us focus our mobile business on building strong consumer-based, ad-supported mobile experiences.”

With the addition of Tegic, Nuance will significantly expand its presence on mobile devices. Through extensive contractual relationships with the world’s most prolific handset vendors, Tegic’s flagship T9 predictive text product is embedded on more phones than any other single mobile software. Tegic’s established distribution channels and mobile device footprint offer continued growth for its products and will help Nuance significantly expand its presence on mobile devices, most notably by enhancing options for broadly distributing its speech solutions. By combining speech, handwriting and predictive text into a single, unified interface platform, joint customers, including mobile device vendors, application developers and wireless carriers, can benefit from reduced cost, risk and time to market as they expand efforts to create market-differentiating multimodal features and applications.

The addition of Tegic brings resources and capabilities that are expected to expand Nuance’s market presence and leadership in the rapidly expanding mobile industry:

* Focus on Mobile Opportunities
The companies share core competencies in mobile infrastructure, work closely with a common OEM customer base and maintain similar relationships with leading carriers. Since both companies are focused on the mobile user experience, they have compatible expertise and experience in the areas of human factors and linguistics. Supporting more than 60 languages and 15 different character scripts, Tegic shares Nuance’s commitment to broad language coverage based on custom dictionaries and grammars.

* Strong Industry Relationships
Shipped on more than 2.5 billion mobile devices worldwide, including approximately two-thirds of mobile devices shipped last year, Tegic maintains longstanding relationships with the largest companies in the industry, including Nokia, Samsung, Sony Ericsson, LG and Motorola. This established customer base can be leveraged to generate new opportunities for Nuance’s existing mobile product portfolio. In addition, Tegic’s established distribution channel to all major Chinese handset manufacturers offers tremendous growth opportunities for the product lines of each organization in this fertile market.

* Technological Leadership
Tegic embedded software solutions have set the bar for text input on mobile devices, making mobile experiences faster, easier and more compelling. In addition to its core T9 product, it has expanded its portfolio to support multimodal interfaces, broad languages and additional databases. More than 50 software engineers continue to advance Tegic’s solutions and bring to Nuance more than 70 patents and 140 patents pending worldwide. This strong patent portfolio will serve as a competitive advantage as mobile devices become increasingly complex and multimodal user interface software evolves to directly address mobile search and content accessibility inherent with greater data consumption on mobile devices.

* Talented, Experienced Team
Nuance benefits from the addition of Tegic’s strong management, customer support, and engineering teams, with their proven competencies in creating, selling and supporting mobile embedded software. Tegic’s expertise in the science of predictive linguistics and skills in the architectures of wireless devices will complement Nuance’s expanding teams serving the mobile industry.

On this transaction, UBS and Citigroup are acting as financial advisors to Nuance and Time Warner, respectively.
Investor Conference Call Information

In conjunction with this announcement Nuance will broadcast a conference call over the Internet today at 5:00 p.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 (800) 230-1085 or (612) 332-0345 five minutes prior to the call and reference conference code 877994. 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 877994.

About Tegic Communications Inc.

Tegic is a leading provider of enabling software for mobile data services, including market-leading T9 software. A wholly owned subsidiary of AOL LLC, Tegic was founded in 1995 to develop and market communication technologies for the telecommunications and computing industries. The company is headquartered in Seattle, Washington (U.S.A.) and has offices in London, Paris, Tokyo, Hong Kong, Seoul, Beijing, New Delhi, Singapore and São Paulo. Tegic is on the Web at
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