Tellme Price – $800 Million, or More

Microsoft Corp. is said to be talks to acquire Tellme Networks, a voice applications company, according to The Wall Street Journal and C/Net

This news of a pending acquisition was first reported by TechCrunch in February, but at the time, Tellme executives were quick to quash any speculation and said that they were still an independent company.

The talks continue, but some of our sources say don’t expect an announcement Tuesday. The two outlets speculate that Tellme could fetch up to $800 million, but our source, someone quite familiar with the company say that the price is north of the reported numbers.

Even an $800 million price tag would make it the fourth largest acquisition in the history of Microsoft. Why would Microsoft pay such a hefty price? C/Net speculates that the Tellme technologies could find their way into enterprise applications. Microsoft is betting heavily on the convergence of data and voice.

The real reason will be Microsoft Mobile and non-PC devices where Tellme’s voice interface and back-end server technologies can come in quite handy.

“The leading edge battleground between us and Google in local search really will come on the phone,” Microsoft Chief Executive Steve Ballmer told the WSJ back in May 2006.

That is the money quote. On mobile phones the search business is still up for grabs. Google doesn’t have the kind of control on mobile search as it does on the web. Of course with Windows Mobile growing like crazy – the second-fastest growing mobile phone OS – Tellme’s technology could make Windows Mobile phone infinitely more user friendly, especially when compared to the tediousness of its current UI.

Tellme has raised over $235 million in venture funding, and has 320 employees. An IPO candidate, the company is profitable and counts most large mobile and telecom companies as its customers.