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December 29, 1999

L&H Plans to Spin Out Three Divisions

By CBR Staff Writer

Lernout & Hauspie Speech Technology NV is planning to create separate legal entities for three of its operations to prepare them for IPOs in a radical change of direction for the Ieper, Belgium group. The move is a recognition that as the market for speech products matures, it is developing separate identities in a series of vertical markets. The first two divisions to get separate status are healthcare and globalization & internet translation. Close behind will come the enterprise and telephony solutions group.

President and CEO Gaston Bastiaens said the creating of separate legal entities will enable it to pursue more aggressively the wide range of opportunities, as well as creating more transparent, easily understood and focused business groups.

The move will also go some way to removing the skepticism of US investors, in particular towards L&H and the shares rose yesterday 5.4% to $48.5. While L&H is not giving a timetable for the IPOs at this stage, the first two could come before the end of 2000.

The company moved over Christmas to beef up its healthcare operations with three modest acquisitions in the US market, costing a total of $40m with further earnout payments of up to $9m. It is buying Madison, Wisconsin-based Omni-Med Transcription Inc, which has a customer base of 300 healthcare organizations and has agreed to purchase Linguistic Technologies Inc, a Minneapolis-based medical transcription company.

L&H has also purchased Rodeer Systems Inc’s Florida-based medical transcription business. Together, L&H expect the three businesses to add $25m to revenue next year and be neutral to earnings per share in 2000 and accretive thereafter.

In a public relations blitz to close the year, L&H announced a clutch of agreements with companies in the Far East and Europe. Bastiaens, said L&H expects a surge in its telecom and enterprise software revenue for 2000 and beyond.

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