March 13, 2007 / 8:13 PM / 13 years ago

Microsoft in talks to buy Tellme Networks: sources

NEW YORK/SEATTLE (Reuters) - Microsoft Corp. (MSFT.O) is in talks to buy Tellme Networks Inc., the privately owned voice recognition technology company, two sources familiar with the situation said on Tuesday.

A technician adjusts a spotlight at the exhibition stand of Microsoft in preparation for the CeBIT computer fair in the northern German town of Hanover March 12, 2007.REUTERS/Christian Charisius

A deal could value Tellme at more than $800 million, one of the sources said. A second source said the two sides were close to a deal, which could be announced later this week.

Microsoft, the world’s largest software maker, and Tellme declined comment. The talks were first reported by technology news Web site CNET News.

Tellme is a dot-com survivor that has built up a major presence in the U.S. directory assistance market.

Tellme was founded in 1999 by Mike McCue, previously vice president of technology at Netscape, according to Tellme’s Web site.

Tellme relies on speech recognition technology from a variety of suppliers including Nuance Communications Inc. (NUAN.O). However, Microsoft has recently been promoting its own speech recognition technology, which it sells for both computer users and customer call centers.

Nuance’s shares closed down 4.5 percent to $13.39, while Microsoft fell 2.6 percent at $26.72, both on Nasdaq.

Tellme is privately owned by its employees and investors that include venture capital firms Benchmark Capital and Kleiner Perkins Caufield & Byers, according to the investors’ Web sites.

Tellme’s voice recognition technology allows users to gather information from the Internet over the telephone. The Mountain View, California-based company also offers services to businesses looking to automate directory assistance and other phone functions.

The company provides automated phone services for companies, including Merrill Lynch, Cingular and Federal Express, serving over 40 million people every month.

One of the sources said Tellme would be especially appealing to Microsoft in the area of wireless search, or search using a mobile phone.

The software giant sees mobile phone searches as a relatively untapped market where it can compete more favorably with Google Inc. (GOOG.O), the dominant leader in computer-based searches.

One of the hurdles to mobile search has been how best to enter the information sought by a user. Tellme’s voice recognition capabilities could be added to Microsoft’s Windows Mobile operating system for cell phones.

Additional reporting by Eric Auchard in New York

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