Troubled software vendor Lernout & Hauspie Speech Products NV (L&H) has already begun to lay off a total of 1,144 of its employees worldwide in a move to consolidate the company, L&H’s CEO said on Monday. The move comes three days after L&H received bankruptcy protection under Belgian law and announced the resulting layoffs.
“Our work force will be reduced by more than 25 percent,” said John Duerden, L&H president, CEO and managing director in a conference call with analysts and reporters. Specifically, 435 people will loose their jobs in the United States, 351 people in L&H’s Asia/Pacific operations and 208 people will be made redundant in Europe, Duerden said.
On Friday, a Belgian court granted L&H’s second bid for concordat – the Belgian equivalent of U.S. Chapter 11 bankruptcy protection. As part of the concordat ruling, the court has appointed three composition trustees to oversee L&H operations during the provisional six-month protection period.
The recovery program is expected to last over the next 12 to 18 months, and as part of that plan, L&H has withdrawn from the PC software business and has closed down its Korean operations, Duerden said. Furthermore, operations in Singapore will also be greatly reduced.
L&H is expecting to take a US$25 million loss for 2001 at its operating income level, and L&H expects “a loss again in 2001,” Duerden said. Though Duerden said that he expects L&H to be “profitable at the operation level as we move into 2002,” he also warned: “our fourth quarter results are not good.”
Under the concordat law, L&H can withhold payments for six months on a $400 million loan as it comes up with a plan for repayment. L&H received the loan last May to help it acquire Dictaphone Corp. and that loan was backed primarily by five banks including the German banks Deutsche Bank AG and Dresdner Bank AG, and Belgian banks Fortis Bank, Artesia Banking Corp. and KBC NV. Other banks exposed to the company include Shawmut Bank of Hartford, Connecticut.
In the United States, L&H already operates under Chapter 11 of the U.S. bankruptcy law. The company reported $2.37 billion in assets and $489.6 million in debts in its Chapter 11 filing at the end of November.
“No Belgian company has ever filed for Chapter 11 in the United States. But without the Chapter 11 filing that the corporation did in the United States, though it was controversial, without Chapter 11 we would not exist,” said L&H Chairman Roel Pieper during the conference, which was held in Diegem, Belgium.
According to Duerden, L&H has already secured short-term financing in the United States and is in the process of obtaining long-term financing, though he declined to give any specific numbers or details regarding the financing. “We’re working on a long term financing package which we hope to announce in the near future,” Duerden said.
Duerden did not rule out selling some of the company’s assets though he said that L&H has no intention of divesting itself of dictation and call-center company Dictaphone or Dragon Systems Inc., which L&H bought last March in a deal valued at $592.7 million.
L&H plans to refocus by making a marketing push behind four of its speech recognition products in seven markets, with the health care industry being its number one focus, Duerden said. As a result, the company has created a new heath care solutions division.
L&H will redirect 17 per cent of all of its sales in 2001 back into research and development, but the company put its main focus on marketing and customer satisfaction, Duerden said.
Earlier this month, a Belgian judge appointed three officials to guard the company’s assets, a measure requested by a number of Belgian L&H shareholders
Among L&H’s numerous problems, the U.S. Securities and Exchange Commission is investigating L&H’s accounting practices in South Korea, where the company recently discovered nearly $100 million missing from its bank account. “The company will continue to cooperate with the authorities in the United States, Belgium and elsewhere,” Duerden said.
Furthermore, L&H “will be taking a substantial write off” due to the loss in Korea, Duerden said. He insisted that the company only discovered in mid-November that substantial sums of money were missing from the vendor’s South Korean bank account.
As for his personal plans, Duerden said that he would not be stepping down. “I feel a commitment, frankly, to pull this off,” Duerden said.
Lernout & Hauspie, with dual headquarters in Ieper, Belgium and Burlington, Mass., can be reached at http://www.lhsl.com/.