Bankruptcy Auction Begins for Speech Technology Company

November 27, 2001

Bankruptcy Auction Begins for Speech Technology Company

By JENNIFER 8. LEE

The bankruptcy auction for the assets of Lernout & Hauspie, a once
highflying Belgian speech technology company, started yesterday afternoon at
a New York
law office. The proceedings, which could be over as soon as today, are
expected to produce only a fraction of the hundreds of millions of dollars
that
Lernout & Hauspie owes.

The auction has drawn a great deal of attention in the last month, since
bankruptcy courts in Belgium and the United States ordered Lernout to
liquidate.
Various parties have scrambled to find financing in a frigid investment
climate so that they could pick up what appear to be bargains in one of the
most
high- profile technology fire sales ever.

No bidders' names have been released by officials, although some companies
have said they intend to bid. Some former Lernout competitors, like
SpeechWorks
International (
news/quote),
based in Boston, and even a subsidiary, Dictaphone, are among the bidders.
Lernout bought Dictaphone, based in Stratford, Conn., for $475 million in
stock
just last year.

In the last year, Lernout has ridden a downward spiral of accounting
scandal, bankruptcy and the arrests of top executives. The company failed to
stave
off insolvency, and parties were given a Nov. 21 deadline to submit bids for
the assets. The assets, which have been divided into eight groups, can be
bought individually, in combinations or as a whole. Yesterday, lawyers and
investment bankers began determining the best package of bids, which is
subject
to final approval by the courts.

The minimum opening bids for the eight groups were set to a total of $21.5
million, a fraction of Lernout's $9 billion value in the booming stock
markets
of early 2000.

Among the assets for sale is speech recognition technology developed by
Dragon Systems, a company Lernout acquired in 2000 for more than $500
million in
stock. Dragon's technology was set at a minimum price of $6 million.

Janet and James Baker, the founders of Dragon Systems, have spent the last
year trying to extract Dragon from Lernout's bankruptcy. They are not alone
in
bidding for Dragon's assets. Last month, Dictaphone announced a
court-approved licensing agreement for Dragon's core technology. Dictaphone
is also trying
to buy Dragon's technology.

Other assets have already been sold. In August, Bowne & Company (
news/quote),
a financial printer, bought Mendez, a translation unit, for $44.5 million.
In October, MedQuist (
news/quote),
based in Marlton, N.J., bought the medical transcription business for $25
million. Two weeks ago, executives of the Kurzweil Educational Systems Group
unit
of Lernout, a maker of reading software for the blind, announced that they
would buy the unit for about $2 million. In addition, Applications
Technology,
a computer translation unit, was sold for $2 million to Apptek Partners.

Copyright 2001 The New York Times Company |


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