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November 3, 1999

Jittery L&H Looks to Calm Fears over Microsoft Entropic Buy

By CBR Staff Writer

A jittery Lernout & Hauspie Speech Products NV is looking to calm market fears about how Microsoft Corp’s acquisition of Entropic Inc will affect its relationship with the Brussels, Belgium-based company. In a document posted on its web site, L&H claims that Microsoft’s move will help the speech market overall by driving the use of speech as a user interface for the computing environment.

L&H speech software is already integrated in several Microsoft platforms from Windows on the desktop to Windows CE and the Auto PC project. The company says that it will continue to collaborate with Microsoft on various projects, including the Microsoft speech application programming interface (SAPI). Microsoft has made two investments in L&H amounting to $60m since 1997, and holds a stake of approximately 7% in the firm. For the last reported quarter, Microsoft accounted for about $7.9m of L&H ‘s $87.5m total revenue. Talking to Reuters, CEO Gaston Bastiaens, said that that Microsoft was essentially buying up Entropic’s engineering talent. A Microsoft spokesperson confirmed that Entropic engineers will work be working to integrate Entropic APIs and toolkit features into future Microsoft SAPI software development kits (SDKs).

The company’s expertise in developing custom telephony applications is a major reason that Microsoft decided to buy Entropic; particularly now that Bill Gates has indicated that Microsoft is looking at telephony as a major growth area for the company in the next century. Entropic’s expertise in speech- enabling telephony oriented systems is an important part of their value proposition to Microsoft, said the spokesperson.

However, Entropic is also recognized in industry and academic circles – the company has strong ties with Cambridge University in the UK – as having developed a superlative speech engine – the processing software that all voice recognition applications are based on.

After the buy-out was announced last week, Entropic’s COO Brian Corbett talked about the possibility of developing a sophisticated speech interface for mobile devices. This too, overlaps with work that L&H is doing with Microsoft, both in integrating SAPI with Windows CE and in regards to future work on projects like the Auto PC in-car speech interface.

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