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Originally published March 15, 2007 at 12:00 AM | Page modified March 15, 2007 at 2:01 AM

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Microsoft to acquire speech-recognition developer Tellme

Microsoft officially announced Wednesday its intentions to acquire Tellme Networks and that it plans to integrate the Mountain View, Calif...

Seattle Times technology reporter

Microsoft officially announced Wednesday its intentions to acquire Tellme Networks and that it plans to integrate the Mountain View, Calif., company's speech-recognition technology into some of Microsoft's best-known applications.

In a conference call about the deal, executives from both companies explained that they expect speech to be used the way a mouse navigates a computer today. The technology, they said, could control everything from phones and computers to game consoles and cars.

"Tellme brings to Microsoft the talent, technology and proven experience in speech that will enable us to deliver a new wave of products and revolutionize human-computer interaction," said Microsoft Chief Steve Ballmer.

Microsoft declined to say how much it paid for Tellme, but sources close to the deal peg it at about $800 million, putting it at the high-end for Microsoft acquisitions.

The privately held Tellme has raised $230 million in venture capital since it was founded in 1999. It says more than 40 million people use its services every month and one in three Americans use it every year.

Mike McCue, chief executive and co-founder of Tellme, said during the conference call that the speech innovation Tellme is developing could be termed "dial tone 2.0."

"We've been working for eight years to bring together the vision and the technology to allow anyone to say what they want and get it from any telephone in the world," he said.

Tellme will remain in Mountain View with its 320 employees and be part of Microsoft's Business Division, led by division President Jeff Raikes.

But it won't stop there.

Microsoft envisions integrating it into its unified communications group, which combines instant messaging, voice calls and other services into one coordinated application. It could also be used for searches on mobile devices and could be added to Microsoft's automotive software, Vista and Office.

"I think it's one of the most important events in the industry in terms of recognizing the movement of speech recognition into the mainstream," said Bill Meisel, an analyst who writes a newsletter called Speech Strategy News.

He said it's difficult for consumers to see how far speech technology has come. Oftentimes they encounter it in frustrating situations, such as dealing with problems in call centers, but it's not limited to such uses, Meisel said.

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For Microsoft, Tellme is not a complete outsider. In fact, it was started by people from companies least likely to be found in the same room — rivals Microsoft and Netscape.

"Microsoft was our arch-nemesis, but one of the first guys we hired was Hadi Partovi," said Tellme co-founder Angus Davis. At the time, Partovi was helping lead the Internet Explorer effort at Microsoft, while McCue and Davis were doing the same at Netscape. The three stayed on similar paths, so when Partovi acted as a technical assistant to Microsoft attorneys during the company's landmark antitrust case, so were McCue and Davis at Netscape.

Partovi said that though they were chief competitors, they had a lot of respect for each other. Once, while in Las Vegas for a conference, they stayed up late playing blackjack and singing karaoke, Partovi said.

To solidify the Microsoft and Netscape connection, Partovi, McCue and Davis brought their bosses on board to fund the company. For McCue and Davis, that was Netscape CEO Jim Barksdale. Partovi brought Brad Silverberg, a senior executive who was just leaving Microsoft to start Ignition Partners, a Bellevue-based venture firm.

In 2001, Partovi left Tellme to rejoin Microsoft, and left again a little more than a year ago to work at iLike, a Seattle company he founded with his brother.

Partovi said he thinks Microsoft can be a leader in voice technology, while Tellme can now have a much greater impact.

"It's great to see them making aggressive moves into a new space," he said of Microsoft. "It's a space where Microsoft wants to be a leader — and boom — now they are the leader in the voice-service platform space."

For Tellme, he said, Microsoft's backing and sales network will allow Tellme technology to move much faster in the market.

Tricia Duryee: 206-464-3283 or tduryee@seattletimes.com

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