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Intel to invest $30 million in speech firm

The chipmaker is investing in Lernout & Hauspie, a leading maker of speech recognition software, to seed the development of that market.

Intel is investing $30 million Lernout & Hauspie, a leading maker of speech recognition software, to seed the development of voice recognition applications for servers and desktops computers.

Lernout & Hauspie, based in Brussels, Belgium, said Intel has signed a binding letter of intent to invest $30 million in L&H, subject to final approval by both parties and by regulatory bodies.

Speech recognition is viewed as a "killer app" that will justify new generations of more powerful computers. In Asia, speech recognition software is seen, potentially, as a replacement for keyboards as the chief data input mechanism because of the large number of characters in certain Asian languages.

Intel is also boosting speech recognition on another front: One of the improvements that comes with the new Pentium III is better speech recognition.

In the U.S. and Europe, speech recognition is expected to grow in popularity on both the desktop as an input method and on servers, to facilitate telephone-to-data transmissions. Historically, processor-intensive applications like these have been the engine driving computer upgrades.

Intel's investment, in fact, will be initially targeted to developing server-side customer service applications that will "translate" spoken commands over the phone to a server to retrieve data or perform other tasks, said an Intel spokesman.

"We want to help grow the computing market, and speech recognition is one of the applications that can potentially do that," said the spokesman.

Under the terms of the agreement, Intel will initially acquire non-voting securities convertible into common stock of L&H. Both companies said they are discussing ideas about how to deploy speech recognition technology in areas such as gathering unfiltered data from databases, and machine-based language translation, among other areas.

If the deal goes through as planned, Intel would join Microsoft as a marquee-name investor in the European software firm. Last month, Microsoft exercised warrants to purchase 857,142 shares of L&H and now holds a 7 percent stake in the firm.

"Voice and language technologies will help enable a new level of natural interaction with data and computers," said Ron Whittier, senior vice president and general manager of Intel's Content Group in a statement. Intel has also made equity investments in Nuance Communications and ALTech, two other speech recognition firms, the spokesman said.

Earlier this week L&H said that it would restate its 1997 and 1998 earnings figures, after a review of past acquisitions by the U.S. Securities and Exchange Commission.

The company had written off about $153 million, or about 60 percent, of about 10 acquisitions made since 1996 worth about $250 million, to account for in-process research and development costs. The SEC ruled that the company can only write off about 40 percent, or $112 million--a $42 million difference it will amortize against future results.

Smaller write-offs will cause the company to reduce its 1997 loss per share to 41 cents a share from 97 cents. For the first three quarters in 1998, its loss per share will be reduced to $1.25 from $1.59. Earnings, before acquisition-related write-offs, will be reduced 4 cents to 49 cents a share in 1997, and 6 cents to 46 cents a share for the first three quarters of 1998.

Analysts estimate full-year 1998 earnings will be reduced by about 9 cents a share. Lernout reports 1998 results today.

Lernout has seen its share price fall about 30 percent since last October on investor concern about the SEC review. Among acquisitions investigated were Lernout's purchase of Kurzweil Educational Systems and Tiksoft LLC last year.

The company recently revamped its structure into three separate units--a move seen by analysts as likely to improve its sales prospects as it targets specific market segments.

Bloomberg contributed to this report.