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Read My Lips

Belgium-based Lernout & Hauspie Speech Products wrapped up its half a billion dollar stock buyout of privately held Dragon Systems yesterday. But it's been just another day at the office for retail investors who've seen Lernout on a shopping spree since the mid-90's scooping up guppies.

The speech recognition software maker has been using some of the run-up in its stock price to beef up its collection of speech technology resources. With more than a dozen acquisitions in the last few years, I really applaud Lernout & Hauspie's move toward aggressive consolidation. If you got it, spend it. 'Cause tomorrow, you may not have it.

The company picked an opportune time to give itself a little makeover earlier this year, combining its speech recognition software, PDAs, Linux, and wireless Net access into a new gizmo dubbed Nuk, the Hawaiian word for "echo." Its new strategic direction shot Lernout's stock price out of a cannon, nearly tripling in less than a month on the news.

Personal Digital Assistants enjoyed the flavor of the month back when Palm hit the new issues market back in March. But these days, rival Handspring can't seem to squeeze its big behind through the constricted IPO pipeline. Which is a shame, considering Palm's ex-founders (an oxymoron, but it's got a nice ring) run circles around the 3Com spin-off.

But that's the way things go when start-up market caps are built and razed overnight.

Massachusetts-based Dragon Systems boasts its flagship NaturallySpeaking product suite that promises to transcribe voice to text in six different languages. Business was booming before Lernout & Hauspie came a knockin', but losses kept pace and Dragon needed this exit strategy in a big way.

Dragon unsuccessfully attempted to shake the IPO money tree last year with a portly $100 million offering with blue chipper Morgan Stanley at the wheel. In the end, the start-up tried to panhandle badly needed funds from retail investors who hadn't yet warmed to the idea of voice recognition players. At that point, finding a dance partner wasn't a luxury but a foregone conclusion.

While there's been bucket-loads of attention showered on the voice recognition software industry, I'm still trying to figure out when this stuff will live up to its hype. Dragon is a graybeard in its business, but when will it be able to put together some halfway decent voice software for normal human beings?

I've tried them all at one time or another, and the technology has light years to go before it can be considered a reasonable alternative. I second the motion that there's definitely a place for voice recognition applications in hands-free mobile devices, but wake me when I can toss out my keyboard.

Any questions or comments, love letters or hate mail? As always, feel free to forward them to kblack@internet.com.