Microsoft to Acquire Tellme Networks

Microsoft will buy Tellme Networks, which provides voice-enabled mobile search, directory assistance and computerized, speech-driven customer service hotlines.

(Seattle) Microsoft said Wednesday it will buy Tellme Networks Inc., which provides voice-enabled mobile search, directory assistance and computerized, speech-driven customer service hotlines.

Company officials declined to comment on a news report that set the value of the deal at about $800 million. In a note to investors, Credit Suisse analyst Jason Maynard estimated Microsoft will pay more than $1 billion.

Microsoft Corp. said Tellme's technology could be applied to a wide swath of products, including its market-leading Office suite and mobile search, as well as applications for the home and car.

"We think you should just be able to say, 'Show me the Daily Show,' (and be) watching what you want on TV just by speaking it," said Mike McCue, Tellme's chief executive officer.

McCue and Jeff Raikes, president of Microsoft's Business Division, also envisioned cellular and Internet-based phones that ask users what they want to do. Then, depending on the answer, the devices could establish a conference call, deliver sports scores or directions to a neighborhood coffee shop.

Tellme, a privately held company based in Mountain View, Calif., powers American Airlines' computerized phone line that lets travelers check flight information, as well as the voice-recognition system that lets callers order a pizza from Dominoes without speaking to a real person. It also provides 411 directory assistance to AT&T and Verizon Wireless, and is used in some form by about 40 million people each month, McCue said.

Raikes said Microsoft will be able to combine its own work on voice commands for Windows Mobile devices and Vista, the latest version of its Windows operating system, with Tellme's approach to offering software as a service over the Internet -- a major shift in the software industry's business model that Microsoft is just warming to.

"It would be a really nice opportunity to have organizations paying Microsoft ongoing service revenue," said Rob Horwitz, an analyst at the independent research group Directions on Microsoft.

Horwitz said Microsoft has "really lusted after" the mobile device market, but the Windows Mobile platform has been slow to catch on. Licensing Tellme's applications to service providers, or building its Windows Mobile applications on top of the Tellme platform, could give the Redmond-based software maker's mobile division a boost.

Tellme's mobile business search application, which lets cell phone users text-message or say what they're looking for, from a map to a phone number, could also help Microsoft edge ahead of Web search leaders Google and Yahoo, said Roger Kay, president of the Massachusetts-based research group Endpoint Technologies Associates.

Still, given that Microsoft has made its own forays into voice recognition, Kay wondered whether the acquisition amounts to "a tacit admission that some of Microsoft's own voice technologies were falling short."

Raikes and McCue said one area they hope to improve is the ability for the system to understand natural language instead of the very limited number of commands that voice systems can handle today.

Shares of Microsoft rose 67 cents to close at $27.40 Wednesday on the Nasdaq Stock Market.

The deal is expected to close in the second quarter. Tellme and its 320 employees in Mountain View, Calif., will become part of Microsoft's Business Division, the company said.


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