Speech recognition software vendor Dragon Systems Inc has balked at an initial public offering again and appears set to enter into a major and lucrative partnership or perhaps even be acquired outright. In a surprise move, the company announced yesterday that it would forgo its entrance into the strong market for technology stocks and delay its long-awaited IPO, in order to pursue negotiations with several potential strategic investors. The company had been expected to go public last month but delayed the stock sale – by what was though to be only a month or so – due to a poor fourth-quarter performance.
In a statement issued late Thursday, the company said the decision will allow Dragon to engage in technology and business initiatives that will significantly expand and accelerate its markets with major industry alliances. The now-profitable company claims to have just completed the highest-revenue quarter in its history. The logic behind the move, Dragon says, is to accept strategic corporate investments now to accelerate growth and capitalize on the huge potential of the speech market – and then see an even more successful IPO in the future.
In line with its decision, Dragon will withdraw its registration statement for the IPO with the Securities and Exchange Commission. Seagate Technology Inc, which owns a 35% stake in Dragon, came out in support of the decision. In an SEC filing last month, Dragon had reported that sales for the fourth quarter – its most important and seasonally the strongest sales period – rose only 5.3% from the third quarter to $21.8m. Net income for the period fell to $1.6m from $7.6m in the third quarter. For the full year, Dragon booked revenue of $71.4m, up 166% from 1997 revenue of $26.8m. Net income for the year was $10.3m, against a loss of $5.3m.
