Microsoft Makes Own VOIP Move with Teleo Purchase

Updated: With the acquisition of VOIP provider Teleo, Microsoft follows the lead of Google and others in pursuit of voice services.

Microsoft announced Wednesday that it has acquired Teleo, a provider of voice-over-IP software and services. Microsoft said it expects to fold Teleos technology and expertise into its own VOIP product and service developments.

VOIP technology is in MSN Messenger as well as a number of other Microsoft Corp. products and services, the Redmond, Wash., company said. With the acquisition of Teleo Inc., it will be able to bring VOIP deeper into projects under development for consumer applications.

Founded in 2003, San Francisco-based Teleo designs software that allows users to make phone calls via their PCs.

The companys service is already integrated with Microsoft Outlook and Microsoft Internet Explorer, with click-to-call dialing that lets users see outgoing phone numbers on their computer screens or through a Web site.

A key part of Teleos technology lies in providing the ability to make calls from a PC to a standard telephone or cell phone. This feature will likely be integrated into MSN Messenger by the end of the year, the company said.

"Teleo has great technology [that allows it] to deliver superior VOIP quality and an excellent overall customer experience," said Blake Irving, corporate vice president of the MSN Communications Services and Member Platform group at Microsoft, in a release.

"This acquisition opens up infinite opportunities for Microsoft to enable even more relationship-centric communications experiences for our customers in the future," Irving said.

Microsoft and Teleo did not provide financial details on the acquisition, but did say that members of the Teleo executive team would continue to work with MSN following the acquisition, and product developers from the company are expected to now join the MSN team.

Microsofts Teleo buy comes at a time when major portal and search companies have been aggressively pursuing voice services and crafting feature-filled options for customers. Last week, Google Inc. launched its own voice-centered instant messaging service, Google Talk, and America Online Inc. and Yahoo Inc. have also been active in developing new services.


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"Its a very hot market, and everyone is adding features as quickly as they can," said David Edwards, an analyst at American Technology Research Inc. "With Microsoft in the mix, its likely to be even more competitive, and that will drive development."

The match-up between Google and Microsoft might prove especially interesting, said Nucleus Research Inc. analyst Rebecca Wettemann. Although AOL has the most-used instant messaging service, it could be Google and Microsoft that are the liveliest contenders for the quickly growing corporate market, she said.

"Google has strong brand recognition, and is being aggressive in getting into enterprises with its search functionality," Wettemann said. "But Microsoft is deeply entrenched, so its voice services could be easier to adopt. Being the incumbent at many companies could give them the edge."

Although Microsoft declined to comment on Google Talk, MSN Lead Product Manager Brooke Richardson emphasized that recent VOIP moves are not a reaction to other players announcements, but rather part of a long-term strategy.

"MSN has made significant investments in VOIP as another option for our customers to stay connected," she said.

Richardson pointed to another recent VOIP development, the release of MSN Video Conversation, which was included in the release of MSN Messenger 7 four months ago. When Version 7.5 was made available last week, those capabilities were boosted with new VOIP features designed to improve PC-to-PC audio quality.

"Well continue to focus on voice as another important mode of connecting our customers with people that matter most to them," Richardson said.

Editors Note: This story was updated to include further comments from analysts and a Microsoft spokesperson.


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