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Lernout founders resign
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November 9, 2000: 1:10 p.m. ET
Belgian tech firm to restate results after audit; 3Q sales forecast is cut
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LONDON (CNNfn) - Lernout & Hauspie Products NV, a highly touted European technology company whose stock price has plunged more than 90 percent this year amid an accounting probe, said Thursday that two of its founders have resigned from key positions. The company also will restate recent financial statements and warned that third-quarter revenue would fall well below previous estimates.
Co-founder Jo Lernout resigned as co-chairman and managing director of the Belgian speech recognition technology firm, and will now serve as vice chairman of the board of directors. He also will chair the company's technology advisory committee. Pol Hauspie, co-chairman and managing director, has taken a leave of absence, citing medical reasons. That leaves John Duerden, named CEO in August, as the sole managing director.
The troubled company's shares plunged 33.6 percent to $4.20 Thursday on the pan-European Easdaq market in Brussels after the news was announced. U.S. trading of the company's shares on the Nasdaq stock market was halted before Thursday's session began. Shares closed Wednesday at $6.22, down from a 52-week high of $72.50 in March.
In September, the U.S. Securities and Exchange Commission launched a probe into alleged discrepancies into the way L&H booked its sales. The investigation followed a Wall Street Journal report that said some South Korean companies that the company had identified as customers denied having done any business with the firm.  Some shareholders have already filed lawsuits against the company in connection with alleged financial irregularities.
On Thursday, Lernout (LHSP: Research, Estimates) said it would restate financial results for 1998, 1999 and the first half of 2000 as a result of the findings of a special audit committee from accounting firm KPMG. L&H asked the accountants to look into allegations of discrepancies in sales information.
The company said Thursday that the audit would not be completed by Nov. 14 and it would not publish third-quarter results on schedule. L&H said revenue for the quarter would be at least $40 million below its previous forecast of between $165 million and $185 million. The third-quarter revisions are unrelated to the findings of the inquiry, the company said.
Hauspie and Lernout founded the company in 1987 after spotting a rough form of speech recognition technology in gadgets in Asia. Neither man had expertise in the field, so they bought rights to similar technology from scientists at Belgian universities and hired them to help bring it to market. Voice recognition technology allows people to give commands to computers by using their voice.
Duerden is the former CEO of U.S.-based Dictaphone Corp., which L&H acquired earlier this year. In a statement, Duerden said that he would strengthen the company's management team by appointing a new chief financial officer to replace Carl Dammekens, who will move to another position in the firm.
"In light of the ongoing investigation by the U.S. Securities and Exchange Commission, I remain committed to a policy of full and complete transparency and cooperation," he said.
Nico Wallaert also stepped down as managing director, but will remain on the board of directors. L&H appointed Roel Pieper, formerly vice chairman of the company, to chairman of the board.
Analysts said the company's troubles have eroded investor trust in the firm.
The company is "taking the necessary steps to move forward, but it doesn't solve the problems," analyst Stefaan Genoe of Petercam Securities told Reuters. 
-- from staff and wire reports
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Lernout & Hauspie
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