A new gorilla is born
Lernout & Hauspie Signs Definitive Agreement to Acquire Dragon Systems
Business Editors
BURLINGTON, Mass./IEPER, Belgium--(BUSINESS WIRE)--March 28, 2000--
Acquisition to Provide Additional Resources to Pursue New
Market Opportunities; Combined, Companies Plan to Bring
Speech to Mainstream Markets
Lernout & Hauspie (NASDAQ: LHSP, EASDAQ: LHSP) (L&H) announced
today that it has signed a definitive agreement to acquire Dragon
Systems Inc. of Newton, Mass., a privately held leader in speech and
language technology. Combined, the two companies' existing resources
create a ""brain trust"" that is expected to use the best of the
technologies developed in both companies to work on projects designed
to accelerate the use of speech and language in emerging and
mainstream consumer markets.
The acquisition will provide L&H with approximately 350 additional
employees, 170 of whom are research scientists and development
engineers with expertise in speech and language technology. The
addition of these talented engineers and scientists will allow L&H to
accelerate its pursuit of new strategic market opportunities in areas
such as handheld and mobile devices, automotive, WAP, data mining, and
others. It will also help the company meet the growing demand for
speech and language applications in key markets such as telephony and
healthcare. The increased R&D resources and the combined intellectual
properties should also help L&H create speech solutions that are even
more intuitive and user friendly, helping to make speech more
appealing to an even broader group of general consumers.
The transaction calls for L&H to acquire all of the outstanding
stock of Dragon Systems for approximately 5.45 million shares of L&H
Common Stock. L&H expects the acquisition to be slightly accretive to
its EPS (excluding goodwill) during the second half of 2000 and much
stronger beyond 2000. The company expects the acquisition to close in
the next few months. Dragon Systems had revenues of approximately $60
million and a net loss of approximately $22 million for its fiscal
year 1999. L&H intends to use the purchase accounting method for this
acquisition.
""By combining the two companies' R&D resources and leveraging the
sales and marketing teams, we expect to significantly add to L&H's
revenue and opportunity base using approximately 8% of our market
capitalization,"" stated Carl Dammekens, CFO of L&H.
""This acquisition represents an important turning point in L&H's
strategic development,"" said Gaston Bastiaens, president and CEO of
L&H. ""Dragon Systems is a speech industry leader well known for its
technology breakthroughs and its award-winning dictation products. By
combining our talent with Dragon Systems we are pooling some of the
best speech and language minds in the industry to create speech
solutions that are even more user friendly and are applicable for
broader, more consumer oriented markets than ever before. We should
also be able to speed our time to market with existing projects that
to date we have not had the resources to tackle.""
""The union of talented minds, visions and technologies that will
occur as a result of this acquisition will benefit all parties: L&H,
Dragon Systems, the speech and language industry overall and, most
importantly, both companies' customers,"" said Dr. Janet M. Baker,
Chairman of the Board and Co-Founder of Dragon Systems. ""We expect
that combined, the companies will more quickly be able to bring the
many benefits of speech and language to a wider variety of devices and
broader base of users than ever could have been accomplished by either
company alone.""
""This transaction is about joining the resources and technologies
of two companies with common interests and vision,"" said Donald L.
Waite, Dragon Systems' CEO. ""Together, we will be able to offer
customers broader solutions while providing greater opportunities for
our employees, partners, and shareholders.""
Resources to Help Bring Speech to Broad Markets
In particular L&H expects that it will apply its increased
research, development and linguistic staff to accelerate work on key
projects in application areas that include: handheld/mobile devices,
smart phones, automotive, English as a second language, voice to voice
translation technologies, wireless communications for Internet and
e-commerce, intelligent search engines, multilingual text retrieval
systems, and audio mining solutions. In the near term, the company
expects to apply the resources to accelerate its time to market for
NAK (code-named), its patent-pending, prototype handheld device that
utilizes a large vocabulary continuous speech dictation engine and its
L&H RealSpeak text-to-speech (TTS) to easily send and receive e-mail,
surf the Web and conduct e-commerce transactions.
L&H also expects that it will leverage Dragon Systems' existing
resources in the telephony, medical, legal and healthcare
applications, allowing L&H to expand its existing offerings and
customer base to meet the rapidly growing demand for speech-enabled
applications in those arenas. L&H further expects that the many
languages that Dragon Systems supports in its continuous speech
dictation engine will give L&H immediate access to additional foreign
markets for speech, including those in Japan, Italy and Spain.
""With the acquisition of Dragon Systems, L&H clearly advances its
voice processing technology. Together with its recently announced
acquisition of Dictaphone, L&H now possesses the distribution channels
to serve a wider range of applications such as healthcare and legal
and has the technology for emerging voice interface and information
appliance markets,"" said Amy Wohl, President of Wohl Associates.
Dragon Systems Brings Customers, Brand Recognition
Dragon Systems will also provide L&H with access to its large
customer base, which includes companies such as Bank America, Boeing,
Citibank, Compaq, Corel, Dell, Deutsche Bank, Fujitsu, Kaiser
Permanente, Peugeot, Seiko, Sony, Toshiba, Wells Fargo and many
others. Its strong brand recognition in the United States will be
complemented by L&H's strengths in the U.S. and abroad, particularly
in the Pacific Rim and Europe. Dragon Systems will not only bring
additional R&D staff to L&H but will augment L&H's existing lab
facilities with research laboratories in the US and Cheltenham,
England.
In April of 1997 Dragon Systems introduced the world's first
general purpose large vocabulary continuous speech recognition
product, Dragon NaturallySpeaking(R). Since its introduction the
product has claimed well over 100 major industry awards worldwide,
more than any other speech software product. Dragon holds 35 patents
for its speech and language technologies, many of them for technology
employed in its Naturally Speaking product family.
L&H will continue to market and support Dragon NaturallySpeaking(R)
as well as other products in the Dragon Systems family and the L&H
Voice Xpress family of products, providing continuity and support for
Dragon Systems customers and strategic partners and allowing the
company to focus on a smooth integration of resources and strategies.
Over time L&H expects that it will combine the best technologies from
each product to create next generation products for consumers.
Organizational Structure
Following the acquisition, Dr. Janet M. Baker, Dragon Systems'
chairman and co-founder, will be nominated to have a seat on L&H's
Board of Directors and become Chairman of L&H's Technology Advisory
Board. L&H plans to retain other key members of the Dragon Systems
management team including John Shagoury, Dragon Systems' President,
who will play a vital role in the new combined company. Donald L.
Waite, Dragon Systems' CEO and Ellen Chamberlain, Dragon Systems' CFO,
Vice President of Finance and Treasurer will continue to work with
Dragon Systems through the transition period. Both plan to return to
their executive positions at Seagate Technologies, Dragons' largest
outside shareholder.
L&H has proactively put in place an experienced, carefully chosen
integration team, comprised of executive management from each company.
The team's charter will be to focus on a smooth integration of the two
company's combined resources and to continue assessing the challenges
and opportunities created by the acquisition. Dragon Systems has 350
employees worldwide with offices in Newton and subsidiaries in Munich,
Paris, London and Tokyo.
About Dragon Systems
Dragon Systems, Inc., is a leading worldwide supplier of speech
and language technology, including award-winning speech recognition
software. Since its founding in 1982, Dragon Systems has developed a
number of significant technology firsts in speech recognition,
spanning the first built-in PC speech recognition to server based
AudioMining(TM). In April 1997, the company introduced Dragon
NaturallySpeaking(R), the world's first continuous speech dictation
software, which is part of its full line of multilingual speech
recognition products. The company's offerings include continuous and
discrete dictation products for consumer, business and professional
markets, command and control programs, vertical market add-on
vocabularies for specialized applications, such as legal and medical,
customized telephony solutions, and developers' tools.
Dragon Systems' goal is to ""humanize"" the interface between people
and machines by expanding the use of speech - the most natural and
efficient way for people to communicate. Speech capabilities available
from Dragon Systems include continuous and discrete dictation systems,
voice command systems, text-to-speech systems, customized telephony
solutions, and developer tools that enable users to speech-enable
applications and build interactive dialogues or custom vocabularies.
Founded in 1982 by Drs. Janet and James Baker, Dragon Systems has
its headquarters in Newton, Massachusetts. It has European
subsidiaries in Munch, Paris and in Marlow, near London, and
additional research laboratories in Cheltenham, England (Dragon
Systems GmbH, Dragon Systems France S.A.R.L., Dragon Systems SA,
Dragon Systems UK Ltd, and Dragon Systems UK Research & Development
Ltd, respectively). Dragon has a subsidiary in Tokyo, Japan. Dragon
Systems can be found on the World Wide Web at www.dragonsys.com.
About Lernout & Hauspie
Lernout & Hauspie (L&H) is a global leader in advanced speech and
language solutions for vertical markets, computers, automobiles,
telecommunications, embedded products, consumer goods and the
Internet. The company is making the speech user interface (SUI) the
keystone of simple, convenient interaction between humans and
technology, and is using advanced translation technology to break down
language barriers. The company provides a wide range of offerings,
including: customized solutions for corporations; core speech
technologies marketed to OEMs; end user and retail applications for
continuous speech products in horizontal and vertical markets; and
document creation, human and machine translation services, Internet
translation offerings, and linguistic tools. L&H's products and
services originate in four basic areas: automatic speech recognition
(ASR), text-to-speech (TTS), digital speech and music compression
(SMC) and text-to-text (translation). For more information, please
visit Lernout & Hauspie on the World Wide Web at www.lhs.com or
www.lhsl.com.
This Press Release contains forward-looking information, including
but not limited to statements involving the financial and other
contributions expected from the acquisition and L&H's and Dragon
Systems' development plans. There can be no assurance that actual
results will not be materially different than those anticipated in
these forward-looking statements. Factors that could cause actual
results to materially differ from those anticipated in these forward
looking statements include known and unknown risks, including those
set forth below. The acquisition of Dragon Systems will involve
numerous risks, including difficulties in the assimilation of and
integration of operations, technologies and products of Dragon
Systems, and the potential loss of customers and key employees.
Moreover, consummation of the acquisition is subject to certain
conditions, including the obtaining of the required regulatory
approvals. As a result there can be no assurance that the expected
acquisition will be consummated on the terms described herein, if at
all. The forward looking statements contained herein are also subject
to the significant known and unknown risks and uncertainties generally
applicable to L&H's business, including uncertainty of new product
development, the risk that newly introduced products may contain
undetected errors or defects or otherwise not perform as anticipated,
early stage of development of the speech technology market, the
company's ability to manage its growth and changing business, the
retention of key technical and other personnel, currency and other
risks related to international operations, rapid technological change
and intense competition, as well as other risks set forth in L&H's
filings with the Securities and Exchange Commission. L&H cautions
readers not to place undue reliance upon any such forward-looking
statements, which speak only as of the date made. L&H expressly
disclaims any obligation or undertaking to release publicly any
updates or revisions to any such statements to reflect any change in
the L&H's expectations or any change in events, conditions or
circumstance on which any such statement is based.
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