Vocalis, a developer of speech recognition technology, has formed a joint venture with BT to produce software for people to talk over the internet and listen to emails.

Charles Halle, Vocalis' chief executive, said the development of a software speech recognition product, targeting call centres, could deliver the industry big cost savings and improve staff efficiency.

The Vocalis product range includes SpeecHTML that enables companies to offer a phone number which people can call to find information on a website where they can access email messages and reply and delete using voice commands.

SpeechMail is being used by more than 70 internet service providers in the UK, including BT Internet. Vocalis has primarily marketed this product to the consumer market and is now about to target business customers.

However, Vocalis's investment in what is next generation software, and its attempts to build a market leading position, have taken a severe toll on the company's earnings.

The group yesterday reported that its pre-tax loss for the year had grown from £1.1m to £4.5m as Vocalis more than doubled its research and development budget to £2.2m in the year.

Mr Halle added that further investment in staff, systems and infrastructure had also led to the deterioration in earnings. "Following the steps we have taken, we are now well positioned to capitalise on the expected rapid expansion of these markets to create volume businesses," he said.

Even so, the company said it had not received as many equipment orders for its SPEECHtel product in the year, resulting in sales falling 44% to £2.7m.

Shares in Vocalis shed 30p to 240p.