Philips sells some speech technology to ScanSoft

ScanSoft Inc. has agreed to buy some of the speech technology assets of Koninklijke Philips Electronics NV in a deal valued at €36 million (US$35.3 million), the companies said Monday.

ScanSoft of Peabody, Massachusetts, will take over the Telephony and Voice Control units of Philips Speech Processing, a part of Amsterdam-based Philips, Europe's largest consumer electronics company, the companies said in a statement.

The Telephony unit sells systems such as voice-accessed directory assistance to telephony systems integrators and service providers. Voice Control provides software for speech recognition in devices; its customers include device makers and the automotive industry, according to Philips and ScanSoft.

Philips is not selling all of its speech recognition assets. The company is keeping the bulk of its speech recognition dictation business and will continue to employ about 325 people in this area that is vital to its Medical Systems division.

"We are focusing on the technology that is important to us," said Andre Manning, a Philips spokesman. "The part we sold is important as well, but we were having trouble getting the business off the ground because of the slump in the telecommunications industry."

ScanSoft is known for its OmniPage OCR (Optical Character Recognition) scanning software and its digital document management software. The company last year acquired the bulk of the assets of fallen Belgian speech technology star Lernout & Hauspie Speech Products NV (L&H). It says it has now completely integrated that business. The Philips buy will bring it 250 additional staff, mainly located in Germany, but also in the U.S. and Taiwan.

The €36 million deal consists of €3 million in cash, a €5 million note and a €28 million coupon convertible into ScanSoft shares at $6 a share. When exercised, Philips would get an 8 percent stake in ScanSoft, Manning said. The coupon can be used at the earliest in two years and at the latest in three years, he said. If not used, Philips would get €28 million in cash, according to Manning.

The transaction is subject to customary closing conditions and is expected to close in the first quarter, ScanSoft and Philips said.