June/July 1999, Vol. 16, No. 5 & 6 Speech and translation developer acquires two companies in one day — Lernout & Hauspie's Belgian buying binge As reported in the May 1999 issue of ISR, Philips Electronics (The Netherlands; www.speech.philips.com) has made significant in-roads to the U.S. speech recognition market by purchasing Voice Control Systems (Dallas, TX; www.voicecontrol.com). In turn, Lernout & Hauspie (Ieper, Belgium; www.lhsl.com) seems to be strengthening its European efforts by buying out the Flanders Dialogue Company (FDC) and the Brussels Translation Group (BTG). L&H increases its telephony development resources On June 29, Lernout & Hauspie announced the acquisition of the Flanders Dialogue Company, an Ieper-based firm that develops and implements tailor-made computer telephony applications, for $6.5 million in cash. The acquisition should allow L&H to further build its already successful telephony business and help meet growing market demand for telephony-based solutions by giving L&H developers expertise in creating robust, multilingual telecommunications applications. FDC's telephony application development expertise in banking, travel, recruitment and stock quotes will build on and complement L&H's ability to create leading-edge technology for telephony solutions.combined, the companies' resources will give telecommunications vendors and users "one-stop" access to a wide range of robust, advanced telephony solutions for multiple platforms, in multiple languages. FDC's 14 developers will continue to work in the Flanders Language Valley Business Park in Ieper, Belgium, where L&H also has its international headquarters. Patrick De Schrijver, president of L&H's speech and language technologies and solutions division, said, "Our skill in developing and marketing telecommunications technology complements FDC's applications development expertise.combined, the two companies' resources create a strong skill set to capitalize on the telecommunications market potential." Industry analysts predict that the market for licensing speech technology for telecommunications applications will increase from $194 million in 1999 to more than $1.1 billion in 2002. The increasing popularity of speech-enabled solutions for telephony was underscored by last week's announcement about L&H's automatic speech recognition (ASR) 1500 engine deployment as the sole speech recognition technology for the ASR Stock Quote Server, Korea's largest telephone-based automated stock quote and trading service. BTG acquisition positions L&H for anticipated Internet translation growth On the same day it acquired FDC, Lernout & Hauspie announced it purchased all the stock of the Brussels Translation Group, a private organization that invested in the development of L&H's iTranslator services, a family of Internet and intranet translation solutions. L&H's iTranslator allows fast translation over the Internet and intranet using a combination of computer programs and human post editing in a multitude of language pairs (currently 14). The purchase, made for approximately $42 million in cash and the assumption of $17 million in debt, will enable L&H to capture all revenues and profits from the sales of L&H iTranslator. "Industry analysts validate our belief that in the coming years users worldwide will rely on the Internet for increasing amounts of information in multiple languages. Automated translation services over the Internet will give these users a fast, easy way to translate that information into their native language," said Gaston Bastiaens, president and CEO of L&H. "By purchasing BTG, as the demand for these services begins to take off, we position ourselves to tap into this growth opportunity and reap the full benefits of our development efforts." L&H began its work with the BTG in June of 1997, when it entered into a service development and commercial licensing agreement with the group. The agreement provided L&H with funding to develop Internet and intranet translation services for BTG in 14 language pairs, and required L&H to pay license fees based upon a percentage of net revenues realized in the sale or other commercial deployment of these services. The development was to occur over a two-year period, with requirements to meet intermittent milestones, but was completed ahead of schedule, in just 18 months. L&H expects the transaction to be dilutive for 1999 and accretive in the year 2000. L&H does not anticipate any write-off of in-process research and development. L&H has traditionally delivered its translation and localization services to large corporations in the IT, telephony, automotive, aerospace and other markets. The services delivered to these customers are primarily comprised of large, long-term projects of several million dollars with average gross margins of around 40 percent. The introduction of L&H's iTranslator services should give the company access to an established document translation market which, according to industry analysts, is around $700 million worldwide. This Internet and intranet translation business is expected to have an average gross margin of approximately 65 percent. The company expects that by the year 2000, 15 percent to 20 percent of its linguistic services business will be derived from an Internet and intranet translation business model. Additionally, the company believes that starting in the year 2001 this percentage can further increase. The company believes that the BTG investment will not only increase the growth opportunities for L&H's consulting and services business, but more importantly, increase its gross margin for this business. Web Site © Copyright 1999 by Lionheart Publishing, Inc. All rights reserved. Lionheart Publishing, Inc. 2555 Cumberland Parkway, Suite 299, Atlanta, GA 30339 USA Phone: 770-431-0867 | Fax: 770-432-6969 E-mail: lpi@lionhrtpub.com Web: www.lionheartpub.com Web Design by Premier Web Designs E-mail: lionwebmaster@preweb.com