Belgian text-to-speech and voice-recognition software maker Lernout & Hauspie Speech Products NV (L&H) Wednesday filed for Chapter 11 bankruptcy in an effort to address the company’s ongoing financial difficulties.
L&H said in a statement that it tried to reach an agreement with bank lenders but could not agree on acceptable terms with the institutions. The company is in the middle of an investigation by the U.S. Securities and Exchange Commission (SEC) regarding financial statements from the last two years. In addition, L&H announced early this month that company cofounders Jo Lernout and Pol Hauspie would step down from their positions as cochairmen and managing directors.
Lernout and Hauspie reportedly resigned from their posts in an effort to resolve recent controversies affecting the vendor.
L&H’s Dictaphone Corp. unit and L&H Holdings USA Inc. also will file for reorganization under Chapter 11 of the U.S. Bankruptcy Code. Lernout & Hauspie Speech Products NV in Belgium also will file for bankruptcy under Belgian law in the near future, according to an L&H statement.
L&H looks for the voluntary filing to help it address past difficulties and to promote a new strategic plan for leveraging the company’s technology assets. Alongside the problems with financial institutions, L&H cited a recently discovered cash shortfall on the balance sheet of a Korean subsidiary as a reason for the move.
Amy Wohl, research analyst and president of Wohl and Associates in Narbeth, Penn., said L&H might be a little ahead of its time.
“I don’t think there is any question that they have an interesting set of technologies,” she said. “The question is more about the amount of revenue that could be generated from them.”
The text-to-speech and voice-recognition markets currently do not stand as two of the IT world’s most robust segments. So while L&H may have innovative ideas and applications, Wohl argues the company might not be seeing the level of demand required to generate the kind of profits L&H needs to keep going strong.
Additionally, L&H made a number of investments and acquisitions over the last few years that seem to have the company stretching its financial limits, Wohl explained. “Clearly, the company is going to have to refocus,” she said. “They are going to need to look at the value of those assets.”
During a meeting with analysts two weeks ago, Roel Pieper, chairman of the board at L&H, said his company would consider virtually any option that would return it to profitability, according to Wohl. She sees Wednesday’s move as in keeping with that forecast and added that it should give L&H some time to reduce its debt.
On Nov. 9, the Nasdaq Stock Market Inc. halted trading of L&H shares until the company provided more extensive information requested by the index’s officials.
L&H said it would fail to meet a mid-November deadline for the filing of Form 10-Q with the SEC, regarding its financials from the third quarter of fiscal 2000. This announcement tied into the SEC’s ongoing investigation of L&H concerning “certain errors and irregularities” demonstrated during its audit of the company’s fiscal years 1998 and 1999 as well as the first half of fiscal 2000 financial statements.
Lernout & Hauspie, with dual headquarters in Ieper, Belgium and Burlington, Mass., can be reached at http://www.lhsl.com/.