Could you get them to answer how clients are not going to get a busy signal when making a call? I sign on at times and it takes up to 20 minutes some time. Also could you ask Mr. Portney about the following.
St. Louis Post-Dispatch, February 24, 1991
Copyright 1991 St. Louis Post-Dispatch, Inc.
St. Louis Post-Dispatch
February 24, 1991, SUNDAY, LATE FIVE STAR Edition
SECTION: BUSINESS; Pg. 1E
LENGTH: 1335 words
HEADLINE: DIGITECH FALLS SILENT ... TECHONOLOGY GAMBLE LED TO LIQUIDATION
BYLINE: Robert Manor Of the Post-Dispatch Staff
BODY:
Digitech Inc., the flamboyant little Maryland Heights company that gambled on teaching computers to understand speech, was quietly liquidated last year after admitting that it had lost the bet. Digitech's stock, which once traded at more than $8 a share, was finally offered at 2 cents. No one bought. The company's president, Allen J. Portnoy, sold Digitech stock worth $3.2 million in the mid- and late 1980s. At the time, the company predicted a booming future for its electrical equipment and claimed to have developed technology that would allow computers to recognize speech. When times were good, Portnoy gave stock worth nearly $1 million to local hospitals and a medical school. But the speech recognition technology was a dud, the market for Digitech's other products disappeared, and the company filed for bankruptcy in Texas a year ago. ''The company no longer exists,'' Portnoy said in an interview last week. One company insider, who asked not to be identified, said Digitech failed because it focused too closely on its speech recognition development and ignored its existing businesses. ''There was substantial risk involved,'' the source said. ''It was a business decision that Mr. Portnoy made and all of the company resources were marshaled to that end. You have to wonder about the decisions these people make.'' Digitech's fall hurt Portnoy personally. Last year his wages from Digitech were garnished and his Clayton condominium has twice been seized by creditors. Portnoy said he used his own money to keep Digitech alive in its last year. ''I loaned the company about $1.5 million,'' he said. ''I lost it.'' Others involved with Digitech confirmed that near the end, Portnoy's money was the only thing keeping the company afloat. Portnoy, who was paid an average of $220,000 a year for his services to Digitech, now owes court judgments of $470,000 to a former business partner and others, according to court documents. His attorneys no longer represent him because he did not pay them, according to court documents. . Digitech promised much but accomplished little during its seven years of life. The company was created in 1983 as a spinoff from Spartech Inc. of St. Louis. Portnoy, formerly president of Spartech, became president of Digitech. Securities and Exchange Commission reports show that he held more than 1.1 million shares worth about $1.50 per share when the company went public. Digitech hoped to make and rebuild electro-magnetic switches then used by telephone companies while developing more high-tech products. In 1986, Digitech announced that it had developed a new kind of switch that would dominate the telephone market and generate annual sales of $300 million. By mid-year, Digitech also was claiming that it was involved in retrofitting telephone booths to accept credit cards. The company said this market could reach $400 million. Digitech's stock soared. After trading on the over-the-counter market for as little as 50 cents a share, Digitech rose to an all-time high of $8.63 in 1986. It became the fastest-rising stock in the St. Louis area. Portnoy began selling shares, as he was to continue to do for the next three years, SEC reports show. Portnoy never bought shares of his company on the open market. He only sold or gave stock as gifts. In mid-1986 - when Digitech was announcing new orders for its switch and the company's future looked bright - Portnoy sold 200,000 shares of stock worth more than $1.1 million. Portnoy said his pattern of sales was to be expected because he was Digitech's largest stockholder. ''I was very careful not to sell prior to any announcement,'' he said. ''I sold after announcements f rom time to time for business reasons.'' Investor interest cooled the following year and Digitech's stock price declined. But in the summer of 1987, Digitech announced that it had bought two small companies to help it develop computer equipment that could understand human speech. . That startling announcement did little to immediately bolster stock prices, perhaps because the company's goal seemed impossibly ambitious. Analysts did not believe that Digitech, with just 90 employees, could beat IBM, the Massachusetts Institute of Technology, and American Telephone & Telegraph in the race to make a computer that listens. Computerized speech recognition is still in its infancy, despite years and many millions of dollars spent on research. Experimental systems do exist. They require enormous computing capacity and work poorly. If it is ever developed, computer speech recognition will have thousands of applications. It could free millions of American workers from their bondage to keyboards and allow them to talk directly to their computers. The military market alone would be huge. Portnoy made no secret of his company's ambitions. In late 1987, he was publicly saying that Digitech had developed a computer speech system. Incredibly, it was to be used with small personal computers, not the large mainframe computers used by other companies developing speech recognition. In early 1988, Portnoy promised to demonstrate a working prototype of his device at a speech recognition conference in San Francisco. Digitech's stock began to revive, despite a $5 million loss. From a low of $1.13, it rose to $4.62 cents just before the San Francisco conference. Portnoy sold 50,000 shares of Digitech for $133,000 in the five months before the demonstration. . When the demonstration was finally held, observers were underwhelmed. People at the conference saw Portnoy speak the words ''four, five, six'' into a microphone. A few seconds later the words appeared on a computer monitor. Portnoy spoke the words ''one, four, nine.'' The word nine failed to appear. Several other speakers got the same results. That was it. Industry observers laughed. One analyst described the demonstration as ''a non-event.'' Others said it was obvious that Digitech was nowhere near a breakthrough. Investors sold heavily and Digitech's stock fell by 50 percent the day after the demonstration. Portnoy acknowledged that the demonstration had been a mistake and he promised to unveil a new and improved model later. Digitech made the news repeatedly in 1988. The company suffered sharply declining sales. Its main source of revenue, the switches, were no longer in demand because telephone companies developed their own switch technology or went to other suppliers. Then the Internal Revenue Service filed a tax lien for $63,000. The company posted a loss of $700,000 in just three months. Digitech's stock sold for as little as $1.75. But as it had promised, Digitech rolled out its new and improved speech recognition device for a second demonstration, this time for stockholders in St. Louis in October 1988. The company was trying to attract $5 million in new investment and Portnoy told stockholders that Digitech's technology would be on the market within a year. But before the demonstration and his optimistic remarks, Portnoy first sold Digitech's stock. Beginning in mid-July, he sold 95,000 shares worth $192,000. When the equipment was demonstrated here, no one was impressed. The computer could understand only a few words. Often it misunderstood what was said. Digitech's stock, which had been selling for more than $2, began a slow decline toward oblivion after the St. Louis demonstration. Company executives, who asked not to be named, said the demonstrations killed whatever credibility Digitech still had. They said Digitech no longer had the money to pursue its speech recognition program. Digitech could not get a loan. Portnoy said he began pouring his own money into Digitech, still hoping that the speech recognition technology could be marketed. That never happened. By late 1989, Portnoy said, Digitech's fate was clear. ''We had been dealing with some people who were going to (invest some money in it,'' he said. ''When that fell through it was the end.''
GRAPHIC: Photo; Photo by AP ... Allen Portnoy demonstrating Digitech's speech-recognition technology in San Francisco in 1988.
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