Dragon Systems lives on as part of Nuance Communications. But how did Nuance come to own it?

Tom Paine

As Microsoft and Nuance Communications appear close to a deal, its a good time to revisit the tale of Carnegie-Mellon professor James Baker, and his wife Janet, a CMU PhD and researcher, who sold the fruit of their live’s work, Dragon Systems, to  Lernout & Hauspie, in 2000, in an all-stock transaction, only to find that Lernout & Hauspie was a giant fraud and also bankrupt..

Nuance, the eventual owner of Dragon Systems, isn’t the bad guy here; it was Lernout & Hauspie, plus Goldman Sachs, the Bakers’ advisor..

Its an object lesson for any entrepreneur who has an opportunity to sell a business. Be certain of what you’re getting for it, and don’t trust any middleman to do the right thing..

Nuance is reported to be worth about $16 billion to Microsoft, and Dragon seems to be the part of the business thats really growing.

This is an aftermath report by DealBook after a failed suit by the Bakers against Goldman Sachs years later.

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