WSJ Eur on L&H, Aug 9, page 4
by: kapt_z 8/9/00 2:23 am
Msg: 31681 of 31770
Lernout & Hauspie Shares Fall 19%
On Questions About Korean Sales
By MARK MAREMONT
Staff Reporter of THE WALL STREET JOURNAL
Shares of Lernout & Hauspie Speech Products NV tumbled 19% on the Nasdaq Stock Market after an article in The Wall Street Journal raised questions about discrepancies in the company's claims of sales to certain customers in South Korea.
L&H late Tuesday also reported a net loss of $33.7 million, or 26 cents a share, for the second quarter, compared with net income of $9.6 million, or eight cents a diluted share, a year earlier. Sales more than doubled to $155 million, including a $31 million revenue contribution from two U.S. acquisitions in the quarter.
The Korean unit of the Belgian speech-recognition software firm has been a subject of controversy over startling sales gains it reported in recent quarters even as the company's business slowed in other regions. In the first quarter, L&H's sales in Korea jumped to $58.9 million from $97,000 a year earlier, even as revenue from the rest of the world declined 27% to $51.8 million.
In the second quarter, L&H said, Korean sales again rose sharply, to $68 million, from $1.1 million in last year's second quarter. Korean sales made up 44% of total revenue for the second quarter and 55% of revenue excluding the two recent U.S. acquisitions.
In a news release, L&H said it has more than 150 customers in Korea, including Art Lab, Digital Life, Digital SeiYoung Ltd., Hanvit Bank, Hung Chang, Hyundai Securities, Koscom and LG Electronics.
For Tuesday's article, Journal reporters contacted 18 of the 30 companies that L&H had previously identified as customers in Korea. Of those, three said they aren't L&H customers and three others said their purchases from L&H were less than L&H reported. Another company said it wasn't a customer but was in a joint business with L&H that produces less revenue than L&H reported. The article noted that L&H disputed the Journal's findings.
Lernout & Hauspie responded with a statement attacking the Journal's article and said comments attributed to L&H customers "are misquoted or factually incorrect" and that other information in the article was "distorted."
Some analysts defended L&H and criticized the Journal article. Donald Newman, an analyst at Ladenburg Thalmann, told Dow Jones Newswires that L&H has discussed the unusual spike in its Korean business "quite thoroughly," and said the Journal reporters were "going through the same old, cold ground."
L&H said its second-quarter results were adversely affected by the two U.S. acquisitions, of Dragon Systems and Dictaphone Corp., including extra goodwill and interest costs associated with the assumption of $430 million in Dictaphone debt. Excluding goodwill and one-time items, the company said it earned $7.1 million, or five cents a share, compared with $17.6 million, or 15 cents a share, a year earlier.
L&H also said receivables, or payments due from customers, rose sharply to $238 million, compared with $129.8 million at the end of the first quarter and $87.1 million at the end of 1999's second quarter. L&H said the increase was due "primarily" to the inclusion of Dictaphone and Dragon. Gross margins for all three of the company's divisions fell, which L&H attributed largely to the acquisition of Dictaphone.
L&H's second-quarter results were released after the close of regular trading in Europe and New York. The company's shares, which had hit a split-adjusted high of $72.50 in March, fell as low as $26.75 on Nasdaq Tuesday. But the shares recovered somewhat and at 4 p.m. in New York traded at $29.8125, down $7.1875 for the day. L&H also is listed on Easdaq, a Brussels-based exchange for European technology stocks.
Write to Mark Maremont at mark.maremont@wsj.com |
