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Friday, 1 December, 2000, 22:48 GMT
L&H - the fall of a technology giant
Dictaphone advert
The company borrowed $430m to help buy Dictaphone
A year ago, the Belgian firm Lernout & Hauspie (L&H) was the market leader in voice recognition software.

This week the company filed for bankruptcy protection, and is now in talks to sell off some of its businesses in a desperate attempt to repay creditors.


The company has a real hope to emerge from bankruptcy as a much stronger company


Lanny Davis, L&H spokesman
The company, which acquired Dictaphone last spring, now owes a consortium of European banks $430m (301m), banks who have decided it is time to call in their loans.

L&H produces software that allows people to use their normal speaking voice to control computers.

It also makes products for learning and translating foreign languages.

Only eight months ago, shares in the company were at a record high of $72.50 on America's Nasdaq stock market and analysts were forecasting a rosy future.

So what went wrong?

The bubble bursts

The firm's troubles began earlier this year, with reports alleging financial discrepancies.

L&H - a potted history
1987 - set up
March 2000 - buys Dictaphone
14 March - shares hit all-time high
August - allegations of irregularities
21 September - US authorities probe financial statements
27 September - L&H warns of earnings shortfall, shares drop
October - Visteon corp files suit
9 November - shares suspended
23 November - Hauspie quits board
30 November - files for bankruptcy in US and Belgium
The company commissioned an independent audit and later admitted accounting errors.

It then faced problems with its South Korean business: The head of the unit was suspended amid allegations that he had misused a $30m bank account.

In September, L&H warned of a shortfall in the company's earnings and it announced plans for a restructuring.

"We're more Catholic than the Pope," co-founder Jo Lernout said at the time.

L&H also faced legal action by US auto supplier Visteon, which alleged that it had violated terms of a joint venture deal.

L&H shares nosedived on the technology-dominated Nasdaq and Easdaq stockmarkets - both suspended dealings in the shares in November.

Dictaphone debt

The company also faced possible legal action by thousands of small shareholders.

Last week, the company's co-founder Pol Hauspie quit the board as Belgian prosecutors opened an investigation into allegations of forgery and breaches of accounting law.

Then on Thursday L&H announced that it would file for bankruptcy protection and was in talks to sell some of its business divisions.

voice recognition software
L&H specialises in speech recognition software

Some analysts say the root of L&H's troubles lay in its acquisition of Dictaphone in March this year.

When it bought the US company, which specialises in voice recognition systems for call centres, it took on $430m of Dictaphone's debt.

It was a hugely important deal for L&H, which had been gobbling up its rivals in the voice recognition software field for years.

But the company's balance sheets, which had been in the black before the acquisition, were plunged into the red when it bought Dictaphone.

L&H products
Voice Xpress
Power translator
Easy language
Talking Max
The banks that loaned $430m to L&H have apparently been in talks with the firm for weeks to decide how these loans could be repaid.

But one of the banks, Belgium's KBC, has indicated that the discussions are not going well, and the creditors have now asked the company to pay back its debts immediately.

So far, the company itself has made only very general statements.

Company spokesman Lanny Davis has said "we understand their [the banks] concerns and hope that at some time the strong human and technological assets of our company will be able to be borne out".

Speculation is rife as to how L&H might pay back the money.

There is talk that it may have to sell off its key translation business and Dictaphone, the business it bought last spring, as part of a forced restructuring.

And there is even the possibility that the banks could be bracing themselves to write off the loans.

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See also:

09 Jun 00 | E-Commerce
Inside Dot Coms
30 May 00 | Business
Dot.com gold rush ends
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