Updated from 1:01 p.m. EDT
With another late-night press release,
Lernout & Hauspie(LHSP Quote - Cramer on LHSP - Stock Picks), the Belgian maker of speech recognition software, revealed some more disappointing news, acknowledging that its third-quarter profits would likely fail to meet expectations.
Lernout & Hauspie, just before 12 a.m. EDT Wednesday, told Wall Street to brace for a net loss before goodwill amortization and revenue between $165 million and $185 million. In a brief statement, the company did not add any financial detail or say how wide the deficit would be.
Yet Donald Newman, an analyst at
Ladenburg Thalmann & Co. in New York, had predicted a profit of 13 cents a share before goodwill amortization and revenue of $219 million in the third quarter. Newman, who was traveling and unavailable for comment Wednesday, had anticipated a loss of 24 cents a share, taking into account acquisition costs.
Back in the second quarter, Lernout & Hauspie, which has a U.S. headquarters in Burlington, Mass., posted earnings of $7.1 million, or 5 cents a share, before costs related to its acquisition of
Dragon Systems and other special items, down from $17.6 million, or 15 cents a share, a year earlier. Revenue, meanwhile, nearly doubled to $155 million, up from $76 million.
It's only the latest setback. Shortly after midnight on Thursday, Sept. 21, Lernout & Hauspie
acknowledged that the
Securities and Exchange Commission was investigating its
accounting practices. The company, seeking vindication, said it would cooperate fully with the probe and announced plans for a company-wide audit.
Worries stemmed from a report in
The Wall Street Journal, which had raised questions about the company's sales figures from Korea. The company said sales from Korea accounted for more than half of revenue in the first quarter, but some Korean companies claimed as customers later said they had not done any business with the company, according to the report.
The timing of the news releases, naturally, failed to stanch the negative reaction on Wall Street. Shares of Lernout & Hauspie, way off a 52-week high of $72.50, fell some more Wednesday, declining $4.25, or 30%, to close at $9.75.
On the heels of the profit warning, the company issued yet another press release, saying its senior management would hold a conference call Thursday morning to address some of the recent developments and perhaps elaborate on the expected third-quarter results.
The public relations problems fall squarely on the shoulders of newly appointed Chief Executive John Duerden, a one-time
Reebok (RBK Quote - Cramer on RBK - Stock Picks) executive and former head of
Dictaphone, the maker of handheld recorders acquired by Lernout & Hauspie in May.
Although the company remains excited about the prospects for voice-recognition technology, which enables computers to respond to human voice commands, it is wrestling with the effects of a major acquisition spree as well as suspicions about its accounting.
"The most recent distractions, including management changes, coupled with the major task of integrating several large companies have impacted our sales momentum," Duerden said in a statement.
"In the immediate term," he continued, "the company will be evaluating its cost base and will be developing plans to improve profit margins as well as additional growth for the upcoming year."
Jamie Paton
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