Lernout & Hauspie

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Lernout & Hauspie Speech Products, or L&H, was a Belgium-based speech and language technology leader company, which was founded by Jo Lernout and Pol Hauspie, and which went bankrupt in 2001. The company was based in Ypres, Flanders, in what was then called the Flanders Language Valley (mimicking the Silicon Valley).

[edit] History

L&H was founded in 1987 by Jo Lernout and Pol Hauspie. After a difficult start, it quickly grew, and, in 1995, it went public on the Nasdaq (LHSP) and was also quoted on the Easdaq. Its headquarters were in Ypres, Belgium, and in Burlington, Massachusetts. At its peak, L&H had a market capitalization of almost $10 billion.

Flanders played an important role in helping and investing in the company and the surrounding Flanders Language Valley. L&H had quickly become Flanders' pride.

In March/April 2000 L&H acquired Dictaphone for nearly $1 billion, then acquired Dragon Systems shortly after. Lernout & Hauspie provided the voice recognition technology needed to propel Dictaphone's voice recognition enhanced transcription system.

For some time L&H was dogged by rumours of financial impropriety, and in early 1999 the Wall Street Journal, in its 'Heard on the Street' column ran allegations by Goldman Sachs analyst Robert Smithson that earnings had been over-stated. Further investigation by Wall Street Journal staffer Jesse Eisinger led to the revelation on August 8, 2000 of a major financial scandal involving fictitious transactions in Korea and improper accounting methodologies elsewhere. In April 2001, founders Jo Lernout and Pol Hauspie, as well as former CEO Gaston Bastiaens, were arrested in what was considered the largest scandal until Enron. L&H finally went bankrupt in October 25, 2001, after struggling for about a year.

The technology was bought by Nuance Communications (known then as ScanSoft) and Vantage Learning after the bankruptcy. Nuance Communications acquired all of the speech technologies and Vantage acquired all of the proofing, spelling, and linguistic search technology.

Many people, especially in West Flanders, were blinded by the company's success and invested their money on L&H stocks. The Flanders regional government became a major L&H investor through a venture-capital arm. During one of L&H's cash crunches, it guaranteed 75% of a bank loan to the company. Both the investors and tax payers lost a lot of money when the company went bankrupt.