Having navigated bankruptcy and distanced itself from its disgraced parent, Dictaphone will re-emerge with new capital and product lines.

Last week, a U.S. Bankruptcy Court judge approved the Stratford, Conn., firm's reorganization plan. The ruling allows the maker of dictation, speech recognition and communications equipment to start fresh.

"With the blanket of Chapter 11 lifted and in light of recent R&D investment and key technology acquisitions, we are well positioned for growth in our multiple businesses," said Rob Schwager, Dictaphone's president and CEO.

Under the plan, Dictaphone's unsecured creditors will own all its common stock. Additionally, some creditors will also receive warrants to acquire additional shares, while other will receive a total of $27.3 million in new company notes.

But of paramount importance is that Dictaphone severs ties with Lernout & Hauspie (L&H), the Belgian speech recognition software giant felled by an accounting scandal and charges of executive corruption.

L&H, which had U.S. headquarters in Burlington, Mass., bought Dictaphone in May 2000 in a deal worth $500 million at the time. But L&H borrowed heavily to complete the transaction. That, combined with financial shenanigans, sent L&H into bankruptcy court a scant seven months after the purchase.

Dictaphone succeeded in signing a licensing arrangement for what was L&H's speech recognition engine, language data and natural language software development tools. It also acquired from L&H's PowerScribe product, the health care industry speech recognition system.

"We are very appreciative for all of the support provided by our customers, suppliers, employees and advisors during this critical time," Schwager said. "That support will enable the company to emerge from Chapter 11 on an accelerated timetable."


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