Microsoft Acquires VoIP Firm

Financial terms of the deal were not disclosed. But with Teleo counting only about 100 beta test customers and 15 developers, Sherlund estimated Wednesday that the deal was valued at well below $100 million. Sherlund has an outperform rating on Microsoft and his firm has done banking with the company.

Microsoft said Teleo executives will continue to work closely with MSN following the acquisition, and a number of Teleo product developers are expected to join the MSN staff.

As for competing with other companies in the VoIP arena, Teleo is most similar to Skype, Sherlund noted. Skype's software also lets users make calls on the Internet for free if they're within the Skype network and by the minute for landline calls. Teleo also is similar to Vonage, another VoIP provider. But Vonage also requires a phone adapter to connect a telephone to a high-speed Internet connection.

Shares of Microsoft recently declined 8 cents, or 0.3%, to $27.10.