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Small speech firm scooped up

Bolstering its share of the dictation market, speech recognition company Lernout & Hauspie plans to acquire Kurzweil Applied Intelligence in a $53 million deal.

Bolstering its share of the dictation market, speech recognition company Lernout & Hauspie (LHSPF) announced plans to acquire Kurzweil Applied Intelligence (KURZ) in a cash and stock deal valued at $53 million.

Lernout, which develops speech recognition technology for computers and other electronic devices, will pay $4.02 in cash and $1.05 in Lernout stock for every share of Kurzweil's stock. The deal is expected to close in June and Kurzweil will become a wholly owned subsidiary of Lernout.

The deal will give Lernout dictation technology that is already generating revenue, 60 to 70 engineers who are already familiar with speech technology, and 15 patents that fit into the company's strategic initiative, according to Robert Kutnick, chief technology officer for Lernout.

Lernout will also acquire a company that has the distribution channel to serve the retail market while Lernout serves original equipment manufacturers with its sales force, Kutnick said.

He added that the merger is one few that has occurred in the voice recognition industry, which for years has been on the cusp of seeing demand "take off."

"The demand for speech technology is growing and other companies want to enter [this arena]," Kutnick said. He noted that large-scale companies like IBM (IBM) may look at further acquisitions while smaller players like Kurzweil will be scooped up, as opposed to merging with firms of equal size or going at it alone.

Last winter, Lernout also acquired Berkeley Speech Technology for $15.5 million in cash. The move was designed to increase the company's range of language and product offerings.