Lernout &Hauspie Reports Record Revenues of $110 Million and Earnings Per Share of $0.22 for Fourth Quarter, Before Exceptional Items.

Business/Technology Editors

IEPER, Belgium and BURLINGTON, Mass.--(BUSINESS WIRE)--Feb. 9, 2000

Strong Fiscal Year 1999

Announces 2-For-1 Stock Split

Record Earnings of $22.6 Million or $0.37 Earnings Per Share Before

Goodwill Amortization and Exceptional Items;Cash Flow of $68 Million

from 1999 Operations and DSO's reduced to 86 Days

Lernout &Hauspie (Nasdaq: LHSP, Easdaq: LHSP) (L&), a worldwide market leader in speech and linguistic technologies, products and services, today announced financial results for the fourth quarter and the year ended December 31, 1999.

For the fourth quarter of 1999, L&'s total revenues were $110 million, or a 43.5% increase in the reported revenue of $76.7 million for the fourth quarter 1998. For the fiscal 1999, the company reported total revenues of $344 million or an increase of 62.7% over the reported revenues of $211.6 million for 1998.

The company reported approximately $13.4 million in net income for the fourth quarter of 1999, before exceptional items, or EPS (Earnings Per Share) of $0.22 cents per share on 60.7 million average diluted shares outstanding. Net income for fiscal 1999, excluding exceptional items, totaled $40.2 million or $0.67 per share on 59.6 million average diluted shares compared to $37.8 million or $0.69 per share on 55.2 million average diluted shares during 1998. The exceptional items for the fourth quarter of 1999 resulted in a $2.7 million net loss (unrealized currency exchange loss). For fiscal 1999 the exceptional items resulted in a $2.5 million net benefit (mainly unrealized currency exchange gain).

Revenue for the fourth quarter of 1999 included approximately $56.4 million from the company's Technologies and Solutions Division, $30 million from the Applications Division, and $23.6 million from the Consulting and Services Division, of which $4.7 million came from Internet related business compared to $350,000 in 1998. The Technologies and Solutions Division signed a record of 80 contracts for the quarter. Related party revenue for fourth quarter for the Consulting and Services Division was $7.1 million coming from Microsoft and $1.8 million for the Technologies and Solutions Division, of which $1.4 million came from Microsoft.

The cash flow from operations for fiscal 1999 was approximately $68 million. Days Sales Outstanding (DSO's) for the fourth quarter of 1999 were reduced to 86 days as of December 31, 1999.

&uot;In 1999 we experienced a strong demand for speech and language technologies, applications and solutions, specifically in the Enterprise and Telephony arena. This increase was mainly the result of internal growth and created a positive cash flow from operations of $68 million, reflecting the maturity of our operations,&uot; said Gaston Bastiaens, president and CEO of L&. &uot;During 2000 I believe we will reap the benefits of these changes as we plan to launch separate entities for Healthcare, Internet Translation and Globalization, Enterprise and Telephony Solutions. We foresee L&'s technologies will provide an intuitive speech user interface for the ever growing number of wireless, portable and handheld devices.&uot;

During the fourth quarter and throughout the year, the company remained focused on broadening the types of platforms and devices that employ its technologies, while simultaneously building its resources to create separate legal entities for its key industries: healthcare, telephony, and Internet and globalization. Its success in expanding speech and language technologies beyond the desktop was evidenced by contracts with a number of companies in the wireless and mobile arena. Developments in support of separate legal entity creation included a number of acquisitions and partnerships as well as ground breaking technological advances -- all designed to enhance its offerings and resources in strategic markets.

&uot;The market for speech and language technologies is growing in key industries while also expanding into new markets,&uot; said Jo Lernout, co-founder of L&. &uot;We have the expertise and offerings to not only respond to all these opportunities but to also help accelerate the market through our educational efforts such as the recently launched S.A.I.L. (speech, artificial intelligence and language) Port concept, implemented by the Flanders Language Valley Center, and the L& Worldwide Customer Support Center.&uot;

Highlights of Q4 1999

L& Technologies Grow in Popularity

During the fourth quarter, L&'s Technologies and Solutions Division continued its rapid growth in the Pacific Rim area, signing numerous contracts with high-profile Pac Rim-based developers. Contracts were also signed with Dialogic(R), Periphonics Corporation, Webley, Comverse and Z-Tel, all of whom plan to speech-enable their applications with the L& RealSpeak TTS engine. Other noteworthy contracts included an agreement with Unisys to resell L&'s speech recognition and text-to-speech technology with its award-winning Unisys e-@ction Natural Language Speech Assistant (NLSA) developer's tool set.

Technologies and Solutions Expands in Asia

The demand for speech-enabled applications continued to grow in the Pacific Rim and L& technologies were increasingly popular in the region. South Korean- and other Pac Rim-based developers who plan to build applications employing L&'s RealSpeak, ASR, TTS and dialogue systems solutions include: Hyundai Securities, Samsung Securities, LG Securities, Daishin Securities and Daewoo Securities, EPC Asia, IBCC (International Business Computer Co., Ltd.) NeoTelecom, LG Electronics, Intelligent Communications, Softech Advantage, and Softel Telecommunications Pte Limited. Additionally, L& introduced the product English as a Second Language.

Worldwide Customer Support Centers Launched

L& launched new worldwide customer support facilities in Burlington, Mass. and Ieper, Belgium. Additional centers are expected to open soon in Asia Pacific, Europe and the U.S. West Coast. The centers' offerings include training and support designed to help customers and partners drive the development of speech and language applications. Programs include hands-on development support, remote development support, enhanced classroom training and support offerings, customized ASR/TTS curriculums and more.

L& Technology Continues Move to Wireless, Smartphones

L& announced that Symbian has signed a licensing agreement to incorporate the L& International CorrectSpell(R) and L& IntelliFinder(R) reference engine linguistic technologies in the Symbian platform, designed for Wireless Information Devices such as Smartphones and Communicators. The agreement helps to expand L&'s technologies to the fast growing worldwide market for Smartphones and other Internet enabled consumer devices manufactured by leading wireless manufacturers.

Applications Division Expands Consumer and Vertical Offerings

During the fourth quarter L&'s Applications Division continued to expand its product offering for both the consumer and vertical markets. The Healthcare Solutions Group announced that it had acquired or signed agreements to purchase additional medical industry assets and technologies. The assets from these acquisitions will help L& create an enterprise solution for healthcare and will further its plans to launch a separate entity dedicated to healthcare solutions. The PC Applications Group successfully introduced new versions of L& Voice Xpress in French, Dutch/Flemish, German and UK, as well as legal versions for both the US and Europe.

Healthcare Solutions Group Acquisitions

During Q4, the company entered into an agreement to purchase Omni-Med Transcription, Inc. and Linguistic Technologies Inc. (LTI), and purchased Rodeer Systems Inc., a southern-Florida based medical transcription business.

Medical contracts

The Healthcare Solutions Group signed contracts in the fourth quarter for its healthcare dictation offerings with: Forest General Hospital, Hattiesburg, MS; Northeastern Hospital, part of Temple Health Network, Philadelphia, Penn.; Lehigh Valley Hospital, Allentown, Penn.; Lenox Hill Radiology and Medical Imaging Associates, NY, NY; St. Joe's Hospital, Stockton, Calif.; and Yale New Haven Hospital, New Haven Conn.

Consulting &Services Expands Translation Over the Internet

In early December, L& announced that its Internet translation services would be available through Microsoft's popular Office Update web site providing millions of users with quick, easy access to L&'s machine translation. L&'s human translation services will also be offered shortly. As part of the agreement L&'s Consulting &Services Division can sell its Internet translation services and other offerings, including document creation, human and machine translation and localization services, to millions of new potential customers. The Internet translation service went live on January 25, 2000.

Contracts

During the fourth quarter, L&'s Consulting &Services division signed contracts for localization and/or translation in a wide range of languages with, among others: Bedege Navision, and Volvo of Sweden; IBM, Mitsubishi and Honeywell in France; Bang &Olufsen of Denmark and Modus Media, Consumer Insite, and Ford Motor Company in the U.S.

Stock Split Announced

In conjunction with its fourth quarter and year-end earnings results, L& also announced its intention to institute a 2-for-1 stock split.

&uot;We are initiating the split in order to make L& shares more accessible to a wider audience of potential buyers, as well as to broaden the float of our shares in both the Nasdaq and Easdaq markets,&uot; said Pol Hauspie, co-founder and co-chairman.

The stock split is subject to obtaining necessary approval by the company shareholders, the company expects to give an indication of the effective date of the split in the coming weeks.

Highlights of Fiscal Year 1999

During 1999, L& made much progress in building its business, particularly in key industries in which it plans to launch new separate legal entities. Highlights for the year included:

Partnership Expansion

--Intel Corporation and L& formed a venture to develop e-commerce solutions combining Intel's expertise in performance computing platforms with L&'s speech and language technologies, such as Natural Language Technology(TM) (NLT), intelligent content management (ICM), machine translation and speech synthesis, including L& RealSpeak(TM).

--Intel further expanded its partnership with L& by investing $30 million in L& in the form of non-voting securities and non-interest bearing convertible into L& common stock.

--L&'s partnership with Microsoft(R) was strengthened in Q1, when Microsoft's exercised its warrants to purchase additional 857,142 shares of L& Common Stock. This purchase increases Microsoft's investment in L& to approximately 3.75 million shares, or approximately 6.5% of L& outstanding Common Stock.

Technologies &Solutions Division

--L& enhanced its ability to develop telephony solutions, increased its presence in Korea and continued to expand its telecommunications leadership by acquiring resources that included Bumil Information &Communications, Ltd. of Seoul Korea and others.

--L& RealSpeak TTS technology shipped and more than 58 developers have signed agreements for the engine since its introduction. The engine, which reads aloud any text with a human sounding voice and represents a breakthrough in terms of voice quality and intelligibility, won 3 awards for outstanding technology during 1999.

--National Semiconductor Corporation(R) and L& signed an agreement to support and accelerate advanced speech processing technology in the emerging information appliance market with plans to enable voice-activated computing on devices such as automobile PCs, handheld devices and other appliances.

Applications Division

--L& added several new offerings to its family of L& Voice Xpress continuous speech dictation products and to its family of retail language and translation products. Its new dictation offerings feature L& XpressStart(TM) , a technology that simplifies and substantially reduces software enrollment time to less than five minutes. The L& Voice Xpress(TM) product family received several prestigious industry awards throughout the year, including the coveted MVP award from PC Computing.

--L&'s Healthcare Solutions Group completed its acquisitions of Articulate Systems, furthering the development of its transcription solutions, and of Computer Aided Medical Systems Limited (CAMS), providing it with resources that include a customer base in the U.K. as well as terminology for medical record coding.

Consulting &Services

--Yahoo! Inc. contracted L& to aid in the localization of features and services offered by Yahoo!'s network of global properties and services. L& also received a multimillion-dollar contract from Microsoft for ongoing localization work in numerous languages on projects including Microsoft(R) Encarta Encyclopedia(TM) in multiple languages, Microsoft(R) Network (MSN), Games, Microsoft(R) Works and Microsoft(R) Money.

--L& made its L& iTranslator(TM) Internet translation service available via Internet Service Providers (ISPs), portals and corporate Intranets, and signed Finnish-based Saunalahden Serveri, Dutch-based World Online and ESAT, one of Ireland's largest ISPs to offer the service to their subscriber base.

About Lernout &Hauspie

Lernout &Hauspie (L&) is a global leader in advanced speech and language solutions for vertical markets, computers, automobiles, telecommunications, embedded products, consumer goods and the Internet. The company is making the speech user interface (SUI) the keystone of simple, convenient interaction between humans and technology, and is using advanced translation technology to break down language barriers. The company provides a wide range of offerings, including: customized solutions for corporations; core speech technologies marketed to OEMs; end user and retail applications for continuous speech products in horizontal and vertical markets; and document creation, human and machine translation services, Internet translation offerings, and linguistic tools. L&'s products and services originate in four basic areas: automatic speech recognition (ASR), text-to-speech (TTS), digital speech and music compression (SMC) and text-to-text (translation). For more information, please visit Lernout &Hauspie on the World Wide Web at www.lhs.com.

This News Release contains forward-looking information that involves risks and uncertainties, including statements about the company's plans, objectives, expectations and intentions. Such statements include, without limitation, discussions concerning the company's and its customers new product introductions and developments, the anticipated growth in speech technology markets and the company's ability to capitalize on that growth. Readers are cautioned that such forward-looking statements involve known and unknown risks and uncertainties, including, without limitation, the ability of the company, its strategic partners and customers to develop and successfully market new products, the risk that newly introduced products may contain undetected errors or defects or otherwise not perform as anticipated, the company's reliance on integration of its technology and sales by its customers, the early stage of the speech technology market and uncertainty of market growth, the company's ability to manage its growth and changing business, risks associated with acquisitions, the retention of key technical and other personnel, currency and other risks related to international operations, rapid technological change and competition. The forward-looking statements contained herein speak only as of the date of this News Release. The company expressly disclaims any obligation or undertaking to release publicly any updates or revisions to any such statement to reflect any change in the company's expectations or any change in events, conditions or circumstance on which any such statement is based. All product names and trademarks mentioned herein are trademarks of L& or their respective owners.

        LERNOUT &HAUSPIE SPEECH PRODUCTS N.V. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENT OF OPERATIONS
                           ($ in thousands)
                              (Unaudited)


                          Three       Three      Twelve       Twelve
                          Months      Months     Months       Months
                          Ended       Ended      Ended        Ended
                         Dec. 31,    Dec. 31,   Dec. 31,     Dec. 31,
                           1999        1998       1999         1998
Total Revenues
 Technologies &  Solutions            $  56,416   $  26,756   $ 138,660    $
82,809
 Applications          $  30,034   $  25,324   $ 113,693    $  60,883
 Consulting &Services $  23,591   $  24,596   $  91,884    $  67,900

   Total Net Revenues  $ 110,041   $  76,677   $ 344,237    $ 211,592

Cost of Revenues
 Technologies &  Solutions            $   9,171   $   3,910   $  19,635    $
12,827
 Applications          $   5,738   $   6,651   $  18,988    $  17,895
 Consulting &Services $  15,339   $  14,035   $  55,633    $  38,922

   Total Cost of
    Revenues           $  30,248   $  24,596   $  94,256    $  69,643

Gross Profit           $  79,793   $  52,081   $ 249,981    $ 141,949

Operating Expenses
 General &  Administrative       $   9,522   $   8,744   $  35,767    $  24,578
 Marketing &Sales     $  21,442   $  13,422   $  64,953    $  34,776
 Research &  Development          $  16,533   $   8,872   $  49,621    $
25,165
 Amortization of
  Goodwill             $   9,317   $   6,858   $  32,439    $  16,274
 Write-off of
  In-Process R&            --     $     350        --      $  79,373
 Write-off of
  Goodwill BST              --          --          --      $   3,704
 Other operating
  expense                   --          --          --         $1,821
 Non-recurring expense       ($5)                   $921

   Total Operating
    Expenses             $56,809     $38,245    $183,701     $185,691

Operating Income
 (Loss)                  $22,984     $13,836     $66,280     ($43,742)

Other (Income) / Expense
 Share in Loss
  Unconsolidated
  Affiliates                $711      $4,476      $1,633       $5,969
 Other (Income)/ Expense  $2,399     ($2,411)    ($8,745)     ($5,419)
 Debt Conversion Expense    --          --          --           $891

Net Income (Loss)
 before Taxes and
 Minority Interest       $19,874     $11,771     $73,392     ($45,183)

Taxes                     $8,092      $2,239     $27,150       $5,073

Net Income (Loss)
 before Minority
 Interest                $11,782      $9,532     $46,242     ($50,256)

 Minority Interest        $1,137      $1,017      $4,501       $2,422

Net Income (Loss)        $10,645      $8,515     $41,741     ($52,678)


EPS Calculation
 Net Income (Loss)
  Attributable to
  Common Stockholders    $10,645      $8,515     $41,741     ($52,678)
 Net Income (Loss )
  per Share - Basic                                            ($1.05)
 Average number of
  Shares - Basic                      53,870                   50,235
 Net Income (Loss)
  per Share - Diluted      $0.18       $0.15       $0.70
 Average Number of
  Shares - Diluted        60,667      58,328      59,638

EPS Calculation before
 one time charges and
 after exchange gain
   Net Income (Loss)
    before one time
    charges and after
    exchange gain/loss   $13,353     $13,597     $40,183      $37,844
   Number of Shares
    - Diluted             60,667      58,328      59,638       55,167
   EPS before
    one-time charges       $0.22       $0.23       $0.67        $0.69


       LERNOUT &HAUSPIE SPEECH PRODUCTS N.V. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
                           ($ in thousands)

                                           At Dec. 31,     At Dec. 31,
                                               1999            1998
                                           (unaudited)
ASSETS
CURRENT ASSETS
Cash and marketable securities              $ 130,630       $ 189,429
Accounts receivable                         $ 104,989       $  81,212
Recoverable VAT and Tax                     $   2,616       $   2,312
Inventories                                 $   3,700       $   2,649
Prepaid expenses and other current assets   $  12,498       $   8,347

TOTAL CURRENT ASSETS                        $ 254,433       $ 283,949

Deferred tax asset                          $   7,435       $   4,507
Property and equipment, net                 $  33,688       $  23,298
Investments, net                            $  14,433       $  12,103
Goodwill and intangibles, net               $ 378,062       $ 245,467
Software development costs, net             $   5,687       $   2,210

TOTAL ASSETS                                $ 693,738       $ 571,534

LIABILITIES &SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Notes payable                               $  15,724       $   6,652
Current portion of long-term debt           $   9,315       $  17,653
Accounts payable                            $  19,582       $  22,684
Accrued expenses                            $  39,907       $  34,276
Accrued consideration
 for specific companies acquired            $  27,105       $   5,627
TOTAL CURRENT LIABILITIES                   $ 111,633       $  86,892

Long-term debt                              $  17,840       $  20,004
TOTAL LIABILITIES                           $ 129,473       $ 106,896

Minority interest - PIERS                   $ 146,672       $ 149,232

Common stock and additional paid-in capital $ 535,457       $ 465,749
Accumulated deficit                        ($ 107,898)     ($ 149,640)
Cumulative currency translation adjustment ($   9,967)     ($     703)
TOTAL SHAREHOLDERS' EQUITY                  $ 417,593       $ 315,406

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY  $ 693,738       $ 571,534


                                                            31-Dec-99
                                                           (unaudited)

Cash flows from operating activities :
Net income                                                    $41,741

Adjustments to reconcile net earnings
to net cash provided by
operating activities:


 Depreciation                                                   6,300
 Amortization of goodwill                                      32,439
 Amortization of other intangibles,
  including software development                                7,308
 Deferred taxes                                                (2,928)
 Gain on sale of investment                                      (163)
 Share in loss of unconsolidated affiliates                     1,633
 Loss (gain) on sale of property and equipment                    146
 Changes in operating assets and liabilities :
 Accounts receivable, net                                     (30,212)
 Inventories, net                                                 706
 Prepaid expenses and other current assets                        930
 Accounts payable                                              (3,504)
 Accrued expenses                                              13,878
 Deferred revenue                                                 (67)


  Net cash provided by operating activities                    68,208

Cash flows from investing activities :

 Acquisition of businesses                                   (111,626)
 Licenses and software development costs capitalized          (24,805)
 Additions to property and equipment                           (9,976)
 Proceeds from (purchases of) marketable securities            (3,931)
 Investments in and loans provided to associated companies     (6,013)
 Proceeds from sale of property and equipment                     719


  Net cash used by investing activities                      (155,632)

Cash flows from financing activities :

 Proceeds from (Repayment of) notes payable to bank             1,805
 Repayments of long term debt and capital lease obligations   (32,111)
 Proceeds from long-term debt and capital lease obligations     1,891
 Proceeds from issuance of common and preferred shares         57,749


  Net cash provided by financing activities                    29,334


Effect of exchange rate changes on cash                        (4,645)

Increase (decrease) in cash and cash equivalents              (62,735)

Cash at the beginning of the period                           188,464

Cash at the end of the period                                $125,730