Will embattled Lernout & Hauspie survive?

www.infoworld.com |  Development

LERNOUT & HAUSPIE'S filing for bankruptcy protection this week is raising questions
within the industry about whether or not the vendor long recognized as a market and
technology leader in speech recognition will survive.

At a press conference Friday, L&H chairman of the board Roel Pieper assured
analysts that the company would remain intact. "We are going to focus on preserving
what we have, not on spinning it off," Pieper said.

Yet analysts were less optimistic, saying that the 5,500-employee L&H may be too
vulnerable on numerous fronts for survival without major changes.

Finding a suitor willing to acquire L&H is also unlikely, some analysts argued,
because bailing out a company with an almost half-billion-dollar debt and an open
investigation by the Securities and Exchange Commission for irregularities in financial
reporting isn't very palatable.

Meanwhile, adding to the company's problems, Dictaphone shareholders said they plan
to return to court seeking to nullify the original deal in which L&H bought Dictaphone
earlier this year.

"If [L&H officers] think they are going to lose Dictaphone, their survival strategy
may change," said Amy Wohl, president of Wohl Associates in Narberth, Penn.

L&H has one asset that everyone in the speech recognition industry wants, more than
1,000 computational linguists and software engineers. Linguists are a scarce commodity,
according to Wohl.

"These high-priced scientists are very much in demand from Philips and IBM down to
many smaller guys in the Boston area," Wohl said. "They wouldn't even have to move,"
Wohl added, referring to L&H's Burlington, Mass., headquarters, which are right outside
Boston and near many other speech technology companies.

"My guess is these companies will be circling the parking lot at this point," Wohl
said.

L&H spokesperson Ron Schuermans said the company will do its best to retain key
employees. "It is obvious that confidence has been shaken and employees are worried but
no sign of a brain drain for the moment," Schuermans said.

According to Schuermans, the company is already looking into a retention program to
motivate employees to stick around.

The company is also under attack from external forces and possibly internal forces
that might drain company talent, including its ability to retain its customer bases.
Schuermans admits that maintaining delivery schedules is "difficult at this time."

"We have to wait for a ruling [from the court], and that will determine our
obligations to customers," Schuermans said.

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