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Post of the Day
May 17, 1999

From our
Lernout & Hauspie Folder

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Subject: Re: scoping it out
Author: OurFoolishPride

Hello Zordac and welcome to the LHSP board. Thanks for taking the time to synthesize much of the information on this board. Nice job, especially for such a "quick read."

I agree with you that no clear gorilla has emerged yet. But I do feel like the landscape is fertile Gorilla Game territory. That's why I'm especially glad you joined the discussion to help us sort this all out together.

I'd like to suggest a few refinements to your list of possible contenders and their alliances. Recently, there's been some consolidation of the players. Philips Electronics just announced its intention to buy Voice Control (VCSI) (see, http://biz.yahoo.com/rf/990509/b2.html). I also wonder whether some potential players have been left off the list inadvertently. For instance, one general VR site (http://www.scottrell.com/links/links.htm) lists more VR companies, but I don't know whether any of these are real contenders. As Scollag stated in his post #134, the picture gets a bit more complicated, with some companies offering "plug-ins" for the major applications. And, FWIW, Hoovers (http://www.hoovers.com/capsules/46970.html?ticker) includes Lucent and Berlitz among LHSP's competitors. (However, they may compete in areas other than VR, like language services.) I welcome the input of other Fools to help us refine this list further.

In his post #128, howlinwolf brought to our attention the Dragon-Dell connection (thank you howlinwolf). Scollag's subsequent research (post #135) revealed that Dragon does not have an exclusive deal with Dell. On its website, Dell lists as its VR options Dragon, IBM and LHSP, and some other companies with which I'm unfamiliar. (http://commercedw.us.dell.com/dellcatalog/product.asp?
commodity=Software&category=Work&product=Voice
+Recognition&customer_id=
)

As you mentioned, LHSP has partnerships with MSFT and INTC. But don't forget LHSP's connection with CSCO, through Flanders Language Valley (FLV), which Lambiorix described in his post #118 (and see http://www.flv.be and http://www.easdaq.be/pe/ene_01.asp?ID=1174&Parent=HP).

In your analysis of the potential for growth in VR and related technologies, you seem somewhat skeptical about whether ATHM really wants to offer a natural language interface ("maybe ATHM wants it for the ultimate killer cable appliance - a talking (and listening) set-top box [emphasis mine]"). Personally, I'd strike the "maybe." The Jermoluk interview in Scollag's post #112 has me convinced ATHM is actively pursuing this. For me, the question remains, which company will ATHM go with? FWIW, I recently unearthed this little tidbit (which is, admittedly vague and comes from a source whose reliability I'm not familiar with):
"Companies like Microsoft and Belgian based Lernout&Hauspie are currently working to make voice the standard interface for the tomorrow's generation of set-top boxes. Such a strategy will enable set-top users who do not want to use a keyboard to use a microphone to select channels, browse the Web and compile e-mails on their TV's. Set-tops capable of processing voice commands are slated for release at the beginning of the millennium." (http://www.set-tops.com/voiceactivation.html)

I look forward to your future post discussing the state of the existing technology. I know LHSP flaunts its award-winning reviews on its website (http://www.lhs.com/ ), as does Dragon (http://www.dragonsystems.com/) (the others probably do too, though I didn't check). Hopefully we Fools can develop a more objective means of comparing the competing products the various companies make.

In evaluating LHSP's potential upside, you may also wish to consider LHSP's relationships with the following companies: "L&H has signed approximately 400 OEM contracts to integrate its technology into other companies' products. L&H speech technology is licensed by international leaders in telecommunications, information technology and consumer and automotive electronics, including: Alpine, Deutsche Telekom, Ericsson, Hitachi, Microsoft, Motorola, Lexicus Division, NEC, Northern Telecom, Pioneer, Samsung, SGS Thomson, Unisys and Franklin. L&H has signed agreements with over 600 blue chip customers. http://www.lhs.com/pressroom/corpfacts.asp

And this recent addition too: "During the fourth quarter of 1998, L&H entered into an alliance with GTE Internetworking's BBN Technologies division. The alliance gives L&H perpetual rights to license and further develop the BBN HARK Recognizer large-vocabulary speech recognition engine and toolkit. BBN Technologies also licensed from L&H a full range of speech technologies, including the company's next generation L&H RealSpeak text-to-speech (TTS) engine. The BBN HARK Recognizer is especially well suited to design high-end telephony applications. The agreement also calls for L&H and BBN Technologies to embark on a multi-year research and development initiative." (http://www.lhs.com/news/releases/19990407_q4yearend.asp)

But let's not overlook LHSP's potential downside. You've done a fine job summarizing some of LHSP's possible weaknesses. But I'd like to elaborate on a few. Anyone who's still unsure how the SEC matter was resolved might wish to peruse LHSP's 4th Quarter and Fiscal Year 1998 Results (http://www.lhs.com/news/releases/19990407_q4yearend.asp). Regardless of the SEC outcome, you're right: the whole thing "tainted" the company by linking the name "LHSP" with the phrase "SEC investigation." Moreover, the high volume of reported insider sales before a December 1, 1998 LHSP disclosure relating to the SEC investigation (see http://www.lhs.com/news/releases/19981201_SECComments.asp ) also left a bad impression. Two particularly troubling incidents: Gaston Bastiaens (President & CEO) sold or registered to sell approximately 20,000 shares (gross proceeds of approximately $905,000.) and Carl Dammekens (Senior Vice President of Finance and Acting Chief Financial Officer of L&H) sold or registered to sell approximately 27,000 shares (gross proceeds of approximately $1,309,500.) (http://www.insidertrader.com/freestuff/search.adp). Both the SEC matter and the reported insider sales resulted in many class action lawsuits (see http://biz.yahoo.com/n/l/lhsp.html , from approximately Feb. 16, 1999 to Mar. 18, 1999), many of which I believe are still pending. Additionally, others (TSC's Herb Greenberg, our BeringFoly) question whether there's a "possible conflict of interest whenever Mssrs. Lernout and Hauspie's private investment firm does business with LHSP, particularly the kind of transaction involving Applied." (BeringFoly #107). As BeringFoly astutely observes in the same post, "I am not at all suggesting they did anything wrong. My point is that appearances often count more than reality, and a company that wants to keep its share prices up has to avoid even the appearance of impropriety." The net result of all these "appearances of impropriety?" Some shareholders and prospective shareholders may distrust LHSP management -- another potential LHSP downside to consider.

Lastly, for those who aren't exhausted yet and still want to know more, I found a site dedicated to "Voice Recognition Forums" http://voicerecognition.com/forum/.

Despite the extreme length of this response, I don't intend this to be an exhaustive report on LHSP or VR. Rather I hope it will contribute to more lively discussions on this board.

OFP






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