Urbane Bastiaens heads for L&H ambassador role

And he's not short on stock, if you get the meaning...

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Interview Gaston Bastiaens, the human dynamo and former CEO/president of Lernout & Hauspie, appears to be far from upset at handing over the reins to John Duerden. It's rare for an ex-CEO to hang around and play an active role in supporting the company, but this seems to be what he is doing.

He told The Register in an interview that "I brought the company - a powerhouse for speech and language technology - from $400 million to $5 billion in market capitalisation. The next step is bringing the Internet to everybody, with networked appliances and wireless communication combined with natural language understanding. There is nobody close to us in this field." L&H had "by far the strongest group of engineers, scientists and linguists in the field".

Bastiaens said he will spend "a very substantial part of his time to support the company" and pronounces himself happy with the new situation, free of operational concerns, so that he can spend more time at the coal face. At the moment there appears to be no formalisation of Bastiaens' new ambassadorial role, but there is no evidence of rancour. As a major shareholder, he is clearly interested in looking after his investment, so it is not just from altruism that he is devoting himself to maximising shareholder benefit.

The possibility of John Duerden becoming CEO was "a discussion we have had over the last couple of months". Bastiaens said he "found John a very fine manager, very capable" and that the change was made because of the present position of the company as a result of the need to integrate L&H with Dictaphone and Dragon in four divisions: healthcare; enterprise & telephony; globalisation; and applications. (It has to be remarked that the division names are monumentally unexciting.)

In some ways it is a surprise that the dual roles of CEO and president were not split, with clear responsibilities being established, although this pre-supposes that both Bastiaens and Duerden would have been happy with such a situation, which may not be the case. (Unfortunately, we forgot to mention this to him.)

In a move that both excited and bewildered the L&H critics, Bastiaens recently bought $25 million of shares from Jo Lernout (who still has 16 per cent of L&H's shares) at $40 each in a private transaction, when the price was around $30 at the reported date. This has been seized upon gleefully by the L&H detractors, but they are unable to make any sense of it. The American logic suggests that the shares in the market could easily have been bought over a couple of days without much affecting the price, and that Bastiaens would thereby have saved himself a 34 per cent premium that amounted to some $6 million. However, there's only a small window when a CEO can deal in shares without being accused of insider trading - and the date of the transaction was only 12 days before the announcement of the Q2 results.

We asked about Bastiaens about the this and he said: "The story was very straightforward. I knew that Jo (Lernout) and Pol (Hauspie) wanted to sell some of their shares because they had plans with their not-for-profit organisations in Ieper, Scandinavia, Eastern Europe, Singapore, Japan and other places". Bastiaens though it desirable that the shares were not sold in the open market and that the voting rights were held back. He had discussed the sale with them at the end of June and made the deal in the first half of July, four weeks before the Q2 results were announced, when the share price was around $35. He continued: "I knew that the results were strong, and didn't want to create the perception that I had done a sweetheart deal. $40 at that time seemed to be a very fair price, and seems so today as well. The shares were obtained from both Jo and Pol. It was also a strong sign to the shareholders that I strongly believe in the company." It was "a fair and square deal for me and the shareholders".

It was indeed a supreme gesture of bullish confidence, and one in the eye for the short sellers who had always given him a rough time, criticising his work at Apple (where he ran the Newton project) and at Quarterdeck (where he diversified the company into new product areas). Bastiaens said that he viewed some of the activities of the short sellers as "stock manipulation" with "distorted information" being used "with just one goal - to support the short sellers".

Ellen Spooren (svp of marketing and corporate communications) who was also attacked by the short sellers, would leave the company, Bastiaens said, because she was so used to working with him, but he believed she would continue to support the company and probably set up her own PR activities. "The new CEO needs the opportunity to create his own approach," he observed.

We asked him if he was concerned about Microsoft getting up to some of its old tricks. "I see Microsoft as a partner. I know them very well and will support the company in its relationship with Microsoft. With Microsoft's ability to create markets, and if they put speech in a prominent part of the operating system, this would do more for the speech and language market than anything else." He was not concerned about the cross-licensing of patents, because Microsoft had to pay for every licence.

Since 1997, L&H has had a strategic alliance with Microsoft, which has 5.29 per cent of the company. Microsoft announced in April that L&H would lead in the adoption of the Microsoft SAPI (speech API). Microsoft also uses L&H speaking agents and an L&H text-to-speech engine in Windows ME, as well as an L&H-based translation service at www.officeupdate.com. With Microsoft's history of cooperation, nothing can be certain about the future, but at the moment Microsoft is L&H's biggest customer - although it is slow to pay its bills.

As for the attacks in the WSJ, Bastiaens said: "They created a lot of noise, but the appointment of John Duerden was unrelated to this." ®

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