Microsoft buys speech recognition company

Microsoft announced Wednesday that it is buying privately held speech recognition maker Tellme Networks in a deal believed to be in the range of $800 million.

With the deal, Microsoft gains a company with deep expertise in speech recognition and the intersection of voice and data, an area of keen interest to the Redmond, Wash.-based software giant.

CNET News.com reported on Monday that a deal was in the works and expected to come this week.

The companies did not disclose the purchase price or other financial terms of the deal, which they said is expected to close in the second quarter of the year. Earlier this week, the Wall Street Journal reported that the Tellme was expected to fetch $800 million.

There are many ways that Microsoft could incorporate Tellme's technology, ranging from its work in unifying business telephony and e-mail systems, to adding speech technology to existing software to bulking up its Live Search for mobile phones. The company also said it will build a platform on which other developers will be able to build speech-based applications.

"We’ve made great strides in speech technologies, but have only scratched the surface of what is possible," Microsoft Business Division President Jeff Raikes said in a statement. "The acquisition of Tellme will bolster Microsoft’s existing speech capabilities, bringing both immediate and longer-term value to our customers and partners."

Much of Tellme's recent work has focused on mobile devices. The company recently started testing a cell phone application that allows people to say the information they are looking for and have data sent to their phone. A second service, also in testing, allows people to send a text message with a search query and have the result sent back via text message.

In an interview earlier this month, Raikes talked up the role mobile devices will play in Microsoft's plans, as well as the potential for merging voice and data, but declined to comment specifically on speculation that the company would acquire Tellme.

Tellme was seen as a potential target for an initial public offering last year, though it never ended up filing for a stock sale. More recently, the company has been the subject of takeover rumors, including reports that it would be bought by Google or Microsoft.

The Mountain View, Calif.-based company, which has 320 employees, is profitable and has raised more than $230 million through several rounds of venture capital, the last of which came in October 2000. Former Microsoft executive Brad Silverberg was among Tellme's early investors.

Microsoft said that it expects Tellme's executives and staff to join Microsoft following the deal's close and added that it plans to maintain Tellme's existing services.

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