By Brian White
Lernout & Hauspie Speech Products NV has developed its voice technology products to understand a range of natural languages that it claims none of its rivals can match. The major problem the company now faces is making sense of the conflicting noises emerging from the Redmond, Washington headquarters of Microsoft Corp.
On the surface, the two companies could not be closer. After all, Microsoft is a longstanding investor and only last month bought an additional $15m worth of L&H shares, increasing its investment in the Belgian speech recognition firm to around 3.75 million shares (CI No 3,624).
While Microsoft enjoys a place on the L&H board, and is thus privy to details of the company’s long-term plans, it is also a competitor with an in-house team developing its own Whisper technology. In public, L&H is relaxed about the relationship, insisting it has long known about Microsoft’s plans and points to the number of joint projects the two have underway.
The fact that Microsoft’s record shows it is rarely content to be a minor player in any market it enters has not escaped L&H. Like every other player in a Microsoft-dominated world it is faced with the ultimate dilemma. How do you maintain the close relationships with Redmond necessary for success in a predominately Windows environment, while keeping a sufficiently competitive edge to ensure that Microsoft does not eat your market?
Co-founder Jo Lernout says L&H took the view that it’s better to join this big giant than compete with it. But while competing with Microsoft is only an option for the foolhardy, it is in Redmond’s nature to compete ravenously for developing markets. In order to move forward and open up IT to the billions of people who will never use a PC, voice technology will always be an area where Microsoft is bound to have ambitions.
At present, Microsoft is coy even about plans to voice-enable Windows 2000, though the beta version has a dictation button. Those who have tested it report one of its many flaws is that it reports an error that makes it impossible to use L&H software on the platform.
What is clear is that Microsoft’s plan announced in 1998 to incorporate L&H’s speech recognition technology into Windows within the next three to five years (CI No 3,413) are now unlikely to be fulfilled. All Microsoft will currently say is that it is too early to know exactly what features such as Whisper or other voice technologies will be included in Windows 2000.
Where does this leave L&H? It has to move quickly if it is build the kind of lead that will make it difficult even for competitors with the resources of Microsoft or IBM to offer a full-scale challenge. Lernout says the company plans further acquisitions and will be massively cranking up its R&D efforts.
The company is looking beyond the PC platform and Lernout sees great potential in Sun Microsystems Inc’s new distributed computing technology, Jini in opening up a vast new market. In this sense, L&H is preparing for a post-PC world in which Microsoft will not dominate.
L&H’s translation technology is a key to opening up the internet to non-English speakers, who will be an ever-more important market with the rapid development of countries like China. There remains, therefore, the prospect that Microsoft might make a bid for L&H.
Lernout thinks this unlikely as a software company like L&H should attract a massive premium for any agreed takeover that could even deter a company with Microsoft’s resources. The two founders Lernout and Hauspie control half the board so any bidder would have to win their consent. And Lernout reckons that under the agreements currently in place, Microsoft is getting all it needs for far less than the cost of a bid.
