Microsoft Buys Tellme

The software giant keeps a hand in the handheld market.
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Updated from 12:26 p.m.

Microsoft

(MSFT) - Get Report

is buying closely held

Tellme Networks

in a move that will significantly bolster the software giant's speech-recognition capabilities.

Terms weren't announced, but press reports have put the deal in the $800 million range.

Tellme CEO Mike McCue wouldn't disclose his company's revenue, but did say that it is profitable.

"We process about 2 billion calls a year and we get paid for every one of those calls," he said during a press conference.

The acquisition, announced Wednesday, is expected to be completed in the second quarter.

Tellme, which has more than 320 employees, will continue to operate from its Mountain View, Calif., headquarters as part of the Microsoft Business Division. Following the closing of the acquisition, members of the Tellme executive team and staff are expected to join Microsoft.

"We've made great strides in speech technologies, but have only scratched the surface of what is possible," Microsoft Business Division President Jeff Raikes said in a statement. "The acquisition of Tellme will bolster Microsoft's existing speech capabilities, bringing both immediate and longer-term value to our customers and partners."

Much of Tellme's work is focused on handheld devices, a fast-growing arena that Microsoft does not dominate. "Tellme was founded with the idea that anyone should be able to simply say what they want and get it from any device, starting with the phone," said McCue. "Now, with Microsoft, we'll be able to extend that vision to millions of businesses and consumers around the world."

Tellme's technology is probably not known to many consumers, but is actually in widespread use behind the scenes. Calls for flight information from the American Airlines unit of

AMR

(AMR)

, for example, or to

Domino's Pizza

(DPZ) - Get Report

for a snack are handled by Tellme's speech recognition software, said McCue.

In recent trading, shares of Microsoft were up 20 cents to $26.92.