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Microsoft, Tellme Set 'Dial Tone 2.0'

UPDATED: Microsoft  today confirmed speculation that it intends to buy voice recognition application vendor Tellme Networks. Jeff Raikes, president of Microsoft's business division, refused to disclose the terms of the agreement, but said he expects the deal to close during the second quarter of 2007.

Privately held Tellme provides voice-recognition applications and service platforms used for automating responses to customer calls.

Raikes said the acquisition would give Microsoft added capabilities in such areas as unified communications (UC), mobile search and Microsoft's variant on software-as-a-service (SaaS), which it calls software plus service (S+S).

"The impact of this acquisition will be felt broadly across the company and not just the business division," Raikes said during a conference call with reporters.

But while Raikes touched on how voice recognition will accelerate the company's progress in various markets by enhancing its current offerings, he would not say whether Microsoft would roll out any new applications as a result of the acquisition.

He promised that Microsoft would provide "tangible ideas" after the acquisition closes.

Raikes did say that Microsoft intends to use voice as a significant computer input device going forward, with applications ranging from its Office productivity suite to consumer-oriented search on mobile devices.

Tellme "already does more mobile search support than Google and Yahoo combined," said Raikes.

He also noted that Microsoft intends to help integrated services vendors (ISVs), ISPs and other partners in its ecosystem use hosted versions of Tellme's applications to improve their ability to serve their customers.

"This marks a very important step forward in our strategy of providing software plus service," he said. "Their investments will enhance our own technologies."

To some, the acquisition may seem redundant. After all, Microsoft has already put a lot of effort into its UC product, which combines e-mail, instant messaging and VoIP  into a single client that can be used both on the desktop and on mobile devices and accessed using voice commands.

Last year, it folded Speech Server 2007, its voice recognition engine, into the just-released Unified Communications Server.

But Raikes argued that the acquisition will give Microsoft access to enterprise-class interactive voice response technology in which it has not made significant strides to date. He added that Microsoft will benefit from the relationships Tellme has established with ISPs and wireless carriers.

Raikes stated that Microsoft is committed to the voice XML standard, which he qualified as "very important." But he added that Microsoft will work with the W3C standards body to "advance voice XML," by "bringing some SALT ideas to the table."

SALT, or Speech Application Language Tags, is a standard Microsoft has developed with Intel  and others. Microsoft has often been accused of developing its own versions of open standards for competitive advantage.

Tellme CEO Mike McCue said that his company has made significant advances in voice technology, which has remained relatively unchanged for decades. This technology combined with Microsoft's platform "represents dial tone 2.0," he said.

But Microsoft faces competition from other networking and platform providers such as Cisco  and IBM , which launched its own UC platform earlier this year.

Janice Kapner, director of marketing for Microsoft's unified communications group, noted that competitors are delivering parts of the puzzle. She told internetnews.com that the acquisition "helps accelerate the impact" of the technology.

"Competition is a good thing," she said.

Yankee Group analyst Zeus Kerravala said that in contrast to its competitors, Microsoft is treating voice like a feature rather than a stand-alone product, giving it a leg up in the marketplace.

"In the same way that the browser was a product for Netscape and a feature for Microsoft, IBM is treating voice like a product. Microsoft is saying it's a feature and embedding it within its unified communications platform," he told internetnews.com.

He added that Tellme's voice search capabilities will help Microsoft customers comply with regulations regarding electronic document retrieval and search.