Troubled Xscribe Holds Merger Talks With Competitor

Financially troubled Xscribe has entered negotiations that could lead to a merger with Stenograph Corp., its primary competitor in the market for high-tech transcription systems used by court reporters and law firms, the companies said Friday.

Stenograph is owned by Quixote Corp., a publicly traded firm in Chicago that earlier this year acquired San Leandro-based Baron Data Systems, another manufacturer of computer-aided transcription devices used in the legal field. Stenograph offered $1.66 million, or $.25 per share for Xscribe’s common stock. Xscribe closed down $.125 Friday at $.15625.

“It looks like they might have a deal,” said Irving Katz, director of research for Thomas Green/San Diego Securities. “But who knows, there are so many contingencies.”

Xscribe officials did not return telephone calls Friday, but according to a prepared statement, those contingencies include “forgiveness of various liabilities and other concessions by Xscribe’s creditors and suppliers.” Because the proposed merger involves two companies in the same industry, the deal might also require regulatory approval, according to Xscribe.

The company has “no assurances that the transaction will be consummated,” according to the statement.

Xscribe also announced that founder Robert F. Mawhinney had resigned as chairman because of “personal reasons.” The resignation evidently ended Mawhinney’s association with the company. Last year, Mawhinney resigned as Xscribe’s chief executive officer and was replaced by Suren G. Dutia, who has been named chairman.

Xscribe has struggled in recent years to bring out new products in the rapidly changing transcription industry. During 1989, Xscribe laid off 94 employees, reducing its work force to 250.

On Friday, Xscribe reported a $1.4 million net loss on $3 million in revenue for the second quarter ended Sept. 30. That compared to a $457,000 net loss on $4.4 million in revenue during the like quarter a year earlier. During the past two years, Xscribe has lost more than $12 million.

Stenograph, Baron and Xscribe have been “the big three companies in this business,” according to Marshall Jorpeland, a spokesman for the Virginia-based National Shorthand Reporters Assn.

Xscribe, which began operations in 1978, has had trouble “differentiating itself” from competitors, Jorpeland said. “They’ve done some fine things (with new technology). But there have been follow-up problems, they’ve announced things before they were quite ready.”