How Hype Hurt Lernout & Hauspie

Finally, skeptical investors sold shares

Gaston Bastiaens was flush with anticipation. It was mid-July, and the chief executive of Lernout & Hauspie Speech Products was lunching in style near the company's headquarters in Ieper, Belgium. Between sips of red wine he described how L&H, with its lock on some of the best speech-recognition software, was powerfully positioned as the Web migrated into phones and cars, where people will talk to machines and machines will talk back. With his purchase of two U.S. rivals, the 53-year-old Belgian suddenly had a software company with $1 billion in annual sales, one poised to follow SAP and Nokia Corp. into Europe's tech elite. "This market is going to explode," he said.

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