Microsoft buys software innovator

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The race between Microsoft and Google to perfect voice-activated search – considered a key ingredient for mobile access to the internet – will heat up on Tuesday with the announcement of a range of new voice services from a company about to be acquired by Microsoft.

The software giant’s decision last month to pay one of its highest prices for an acquisition to buy the privately held Tellme Networks underlines the importance it sees in voice-powered applications across a range of devices. While details were not disclosed, one person familiar with the terms of the deal said Microsoft had agreed to pay $800m for Tellme. The deal is due to be completed before the end of the month.

Tellme, whose voice-recognition software is used to power the customer support operations of companies such as American Airlines and FedEx, said it was launching a free directory assistance website in the US on Tuesday. The service will allow visitors to search for local businesses either by name or by the nature of their business. They will also be able to make a request by voice and have information returned in visual form, for instance on the screen of a mobile phone.

That echoes a Google test, begun quietly this month, that also applies voice activation and search to local directory assistance services.

Eventually, technology companies hope this type of service will help to stimulate a new mobile advertising market. However, Angus Davis, one of Tellme’s founders, said his company would operate its service without advertising while it tried to perfect the user experience.

Tellme claims its software is used by telecommunications companies to handle half the calls to US directory assistance. Eventually, these traditional fee-based services would give way to advertising-supported sites like the one being announced today, said Mr Davis.

Microsoft’s acquisition of Tellme showed its belief in voice as “an additional interface across all devices”, he added.

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