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After Gaston, new L&H CEO focuses on nuts and bolts

Duerden aims at productisation

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The essential guide to IT transformation

Interview The acquisition of Dictaphone (completed in May) and Dragon (completed in June) has clearly resulted in a pressing need for L&H to consolidate and productise. It was also clear that a different style of management was required for this work, so Welsh-born ex-rugger player John Duerden (who took US citizenship a couple of years ago and was previously CEO of Dictaphone) was invited by the board to take over as CEO/president. Culturally, Duerden sees himself as mid-Atlantic, having spent most of his recent years based in the US, but the majority of his working life was in Europe.

The Register spoke to him recently. He agreed that L&H needed an operations man now rather than an entrepreneurial leader, and acknowledged that different leadership characteristics were required for a rapidly-growing start-up company compared with L&H today.

He thought that "Gaston [Bastiaens - former CEO] is very courageous" with "a lot of drive". Duerden noted that Bastiaens has "a lot of experience" and that he would "take good advice from wherever I can find it".

We quizzed Duerden about any changes that he anticipated making, but he said he was not looking for dramatic change. He agreed that a new slogan might be "more productisation and less acquisition" but he would not commit to stopping smaller acquisitions.

So far as communications go, "There will always be shorts around, and it's our task to deal with them. The ultimate riposte to shorts is to produce the results." He added that he did not want "to be pre-occupied with the shorts, I'd rather be pre-occupied with driving the business." L&H shares held by management are apparently locked-up for two years, so "it focuses the mind - we have to get this business going and continue to move it".

Duerden expected "to bring more discipline to the way in which we manage things. When a company moves this fast, sometimes the controls need to catch up with it. My immediate task is to try to merge these three separate cultures, three separate product lines, three separate technologies into a well-focussed organisation. That's my number one task... then introducing exciting new products to the marketplace... with processes in place to deliver products to the marketplace consistently and of high quality" with overarching financial controls.

Duerden though that revenue had slowed a little because of the change in the mix of licensing to reselling. "Instead of getting money up front, you have to wait until you have installed the product and it's working." He saw "a progressive switch from just up-front licensing to total solutions" but said that L&H would "continue to be in the licensing business".

Dragon released earlier this month NaturallySpeaking version 5 with better navigation, email and Internet integration. A new product integrating L&H/Dragon/Dictaphone technology is expected in beta at the end of the year, Duerden said. The US Army contract recently announced required a Dragon engine, so this will be in the next generation of iChart products, with the Dragon engine replacing the L&H engine.

L&H will not be drawn as to when the results of the KPMG audit will be released, since this will clearly be market sensitive: the company evidently has enough confidence in the correctness of its Q2 Korean or other results to have commissioned the audit. Duerden said, referring to the audit, that L&H was "moving as rapidly as we can: it's one of my highest priorities".

No doubt KPMG will be extra vigilant in view of the WSJ and other accusations, so it could well be October before the result is known. A good audit result would probably send the share price up, and then cause L&H to activate a shelf registration it has filed for $250 million of its common stock, in order to reduce the debt it inherited from its takeover of Dictaphone. The advantage of not having to set the share price in advance is that it can do so at an opportune moment - when the shares go up, for example - and possibly place the shares quickly with a few telephone calls to institutional investors.

So far as the adverse reporting was concerned, Duerden said he didn't want "to get in a battle with the Wall Street Journal. I'm sure that if, as in other cases, if they've been proven incorrect, they will acknowledge it... We feel confident in the numbers and that the audit will support that." ®

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