Lernout & Hauspie: Recognizing a Huge Market

I remember — back in the 1980s — seeing voice recognition in action. It was
cool stuff, but never seemed practical or accurate. The technology was much
like artificial intelligence; that is, something that never hit critical
mass.

While artificial intelligence is still far off, voice recognition has made
great strides. In fact, with the emergence of wireless technologies, voice
recognition is becoming much more useful. It may even be a killer app.

One of the pioneers and leaders is
Lernout & Hauspie (L&H) (LHSP).
The company has a full suite of product offerings: automatic speech
recognition (ASR), text-to-speech (TTS), digital speech and music
compression (SMC) and text-to-text (translation).

L&H has been on an acquisition spree. But of course, the mega deal occurred
this week, when L&H acquired their rival Dragon Systems. The price tag was
$580 million. As a result, L&H will have about 80 percent of the market for speech
recognition in the US (according to Forrester Research). With the
acquisition, not only will L&H get new customers (Dell and Deutsche Bank
AG), but be in a position to shorten the time it takes to develop new speech
technologies, such as for cars, wireless phones and other hand-held devices.

The company’s acquisitions, as well as its growth in Europe and North
America, have spurred solid financial growth. In the final quarter of 1999,
L&H reported revenue of $110 million, up from $76.7 million the previous
year.

L&H is capitalizing on their lead by making strategic partnerships.
Recently, the company formed a venture with Intel Corp. to develop
e-commerce solutions. Part of this deal, Intel invested $30 million in L&H.

Microsoft also has a 7 percent stake in L&H and a co-development partnership.
What’s more, L&H struck a licensing agreement with America Online to provide
linguistic technology to enhance document searches, document management and
spell checking.

Ultimately, speech will be the way people access the Net. This will be done
via wireless devices, like cell phones and handhelds. And L&H will be the
technology of choice for many of these devices.


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