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To: lurqer who wrote (4221)	9/28/2000 12:49:07 PM
From: Boplicity	Respond to of 65232

2. LERNOUT & HAUSPIE EXPLAINED COMMENT: Lernout & Hauspie (LHSP, $10, down 4) has been all over the board this week. Although it fell on Monday, the stock rallied almost $2 yesterday after the company's founder and co-chairman, Jo Lernout, mentioned that Lernout & Hauspie is now a prime takeover candidate due to its depressed share price. However, today was a completely different story as the stock fell 30% to a fresh 52-week low after the company warned that it would post a 3Q00 net loss on revenues of $165 to $185 million. Although this represents a fairly strong sequential revenue growth rate (in the neighborhood of 6% to 19%), analysts were looking for the company to show a 14-cent profit. Since Lernout & Hauspie did not give any guidance as to how much the loss might be, we could see a big downside surprise as the company gets set to report earnings next month. Top executives attributed the third-quarter weakness to "distractions" such as management changes and the integration of several large acquisitions. September has not been a good month for the beleaguered Belgian speech-recognition software firm. The stock fell from $30 to $14 during the first three weeks on news that the SEC is investigating the company's financial statements. The firm's CEO, Gaston Bastiaens, subsequently resigned. In addition, the company came under fire over possible conflicts of interest created by its Lernout & Hauspie Investment Co., which had made substantial investments in start-up firms with commercial ties to the parent company. All of this news has really been a disaster for the company and its shareholders. So where do we go from here? Although it appears that most of the bad news is already priced into the stock, we could see it decline even further as Lernout & Hauspie gets set to release the results of its own internal audit (this is expected soon). Although Chairman Jo Lernout was quoted in a recent news conference as saying, "We're more Catholic than the Pope," it is becoming increasingly difficult for us to keep our faith in the company. Management simply won't let us. For example, in a conference call this week company CEO John Deurden vowed that he would put the company's problems behind it. However, he refused to take any questions during the call. Does he have something to hide? Right now, the better question might be, "What DOESN'T he have to hide?" From our point of view, John Deurden is starting to look more and more like Tyler Deurden, the maniacal lead character from the hit movie "Fight Club". We are still holding onto the stock for now, but we are very disappointed. Management's new restructuring plan, when combined with the hope of a potential takeover, give this stock some upside potential in the short term. And in the long-term we feel that the technology will be hugely profitable. However, we urge our readers to make up their own minds on this one. Can we be comfortable holding a stock when we don't trust management's credibility? Right now we don't have much of a choice. We have to have some faith that management isn't a complete fraud.