"Dragon would give the Belgian company access to a client base that includes Dell Computer Corp. (DELL.O) and Deutsche Bank AG (DBKGn.DE), Hauspie said."
cnbc.com
UPDATE 2-Belgium's Lernout & Hauspie to buy U.S. rival
(rewrites throughout, changes dateline, byline, updates stock price, adds IBM and analyst comments, more background, PVS Brussels)
By Reshma Kapadia
NEW YORK, March 28 (Reuters) - Shares of Belgium's Lernout & Hauspie Speech Products NV (LHSP.O) (LHSP.ED) rose on Tuesday after the maker of speech-recognition software said it would buy Dragon Systems Inc., its leading U.S. competitor, in a deal valued at about $580 million.
L&H said the Dragon acquisition would shorten the time it takes to develop new speech technology products for cars, wireless phones and other hand-held devices used to surf the Internet -- a market that analysts expect to boom in the coming years. The addition of Newton, Mass.-based Dragon would make the combined company the undisputed leader in the U.S. retail market for speech-recognition software.
"It certainly means that L&H is going to have potentially almost 80 percent of the market, which is significant. Dragon is generally regarded as the market leader in the voice dictation software space," said John Dalton, associate analyst at Forrester Research.
Closely held Dragon currently commands about 48 percent of the U.S. market; Lernout & Hauspie has about 36 percent and International Business Machines Corp. (IBM.N) holds about 15 percent, according to PC Data.
The company agreed to buy Dragon for about 5.45 million shares of its own stock. It said it expected the deal to add slightly to earnings, excluding goodwill, from the second half of 2000. The acquisition is scheduled to close in a few months.
After the news, L&H American Depositary Receipts closed 17 higher, or about 16 percent, at 125-3/4 on the Nasdaq stock market. Earlier in Belgium, the company's shares jumped 19.325 to 128.5 on the Easdaq exchange Incorporating speech-recognition technology into mobile phones allows users to send electronic mail and other communications over the Internet by using their voices rather than typing on a keypad. Users in turn are able to receive audio information over their phones rather than reading it on a screen.
The market for speech technology products for handheld and mobile devices is currently estimated at about $1 billion, analysts say. But that is expected to mushroom alongside the growth of wireless services. Wireless services are expected to achieve 50 percent penetration in the United States by 2002 and 75 penetration by 2010, according to Yankee Group, a research firm.
L&H Co-Chairman Pol Hauspie said in a conference call that the deal would help the company meet the growing number of requests from large companies to form partnerships to develop technology for mobile and handheld devices.
Dragon would give the Belgian company access to a client base that includes Dell Computer Corp. (DELL.O) and Deutsche Bank AG (DBKGn.DE), Hauspie said.
Earlier this month L&H said it would buy U.S.-based Dictaphone Corp., which makes dictation and telephony call center recording systems. That deal was the latest in a series of acquisitions that have boosted the company's position in the speech-recognition market.
Even so, analysts do not expect the enlarged L&H to pose much of a threat to IBM, one of its competitors.
"My impression is that the folks at IBM are not playing or competing in this space as one might think. They are looking at voice-enabled Web technology and are looking at audio mining technology, so I don't think it's going to impact them. They have plenty of other fish to fry," Dalton said.
"IBM is already a global player. We are very strong in Japan where we have 75 percent market share and are leaders in Europe," said Krishna Nathan, director of consumer voice systems at IBM. The Dragon deal "validates what we have been doing and that voice recognition is the future," he added.
"We view speech as one of the engines that will drive the interface for the Web -- access to information anytime and anyplace from mobile location or a fixed office driven by speech," Nathan said.
REUTERS Rtr 18:30 03-28-00
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