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Lernout & Hauspie gobbles up Dragon Systems

Lernout & Hauspie shares hustled up 20 1/4, or 19 percent, to 129 Tuesday after announcing it will buy Dragon Systems, a privately held speech and language technology firm, for $600 million in stock.

Belgium-based Lernout & Hauspie Speech Products (Nasdaq: LHSP) said it will acquire its largest U.S. competitor for 5.45 million shares of common stock.

Company officials said it expects the acquisition to be slightly accretive to its earnings, excluding goodwill, during the second half of 2000 and beyond 2000. The deal will be considered a purchase and is expected to close within a few months.

The Newton, Mass-based Dragon employs 350 workers, including 170 researcher scientists and development engineers with expertise in speech and language technology.

Last quarter, Lernout & Hauspie posted a profit of $13.4 million, or 22 cents a share, on sales of $110 million. In the fiscal year, it raked in $40.2 million, or 67 cents a share, on sales of $344 million.

Dragon Systems had sales of approximately $60 million and a net loss of around $22 million in fiscal 1999.

First Call consensus expects Lernout & Hauspie to earn 15 cents a share in its first quarter and $1.05 a share in fiscal 2000.

After announcing a 2-for-1 split in February, its shares moved up to a 52-week high of 145 earlier this month after falling to a low of 28 last March.

Two of the three analysts following the stock maintain either a "buy" or "strong buy" recommendation. >