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Lernout & Hauspie opens books in SEC probe

The European speech-recognition software maker says it is cooperating with the Securities and Exchange Commission in an investigation of the company's earlier financial statements.

Lernout & Hauspie, the European speech-recognition software maker, today said it is cooperating with the Securities and Exchange Commission in an investigation of the company's earlier financial statements.

The SEC investigation follows the software company's recent mounting of a defense against published reports that described discrepancies in its quarterly sales figures.

News of the SEC probe sent Lernout's stock skidding. In early trading, shares of the company shed $7.75, or 36 percent, to $13.50, surpassing the 52-week low of $15.75. Lernout has hit a 52-week high of $72.50 a share.

Lernout did not disclose the specifics of the SEC investigation. In a statement, the company said it is "cooperating fully in the investigation."

The company, which has joint headquarters in Ieper, Belgium, and Burlington, Mass., saw its shares drop 19 percent Aug. 8 after The Wall Street Journal reported that the company may have given incorrect information about its Korean customers. The Journal's article questioned whether Lernout had achieved the level of penetration of the Korean market that it reported.

In its recent financial results, Lernout stated that sales fell in each of its markets except for Korea, where they were boosted by an acquisition.

While first-quarter sales were down in the United States, Europe and most of Asia, Korean sales rose to $58.9 million from $97,000, fueled by the company's acquisition of Bumil Information & Communications, according to Bloomberg News.

Two weeks after the reports appeared, Lernout announced the departure of its chief executive officer, Gaston Bastiaens. John Duerden, who led Lernout's health care unit after its May acquisition of U.S.-based Dictaphone, immediately replaced Bastiaens.

To allay concerns about its business in Korea, Lernout last month announced it is conducting a midyear interim audit, which will include its Korean operations. Accounting giant KPMG International is handling the audit. The company is still awaiting results.

Lernout competes against other computing giants that develop speech-recognition software products, including IBM and Philips Electronics. The market for speech-recognition technology, which has slowed somewhat, recently gained back investor enthusiasm with the strong public offerings of SpeechWorks and Nuance Communications.