Microsoft makes VoIP acquisition

Microsoft is set to announce that it has purchased a small Internet calling start-up called Teleo, as part of a move to expand the capabilities of MSN Messenger.

The move comes as all the major portal and IM companies are moving more heavily into Internet telephony. Last week, Google launched its own instant-messaging service, dubbed Google Talk, with a focus on voice chatting.

Microsoft has its eyes set on something more like net phone company Skype's service, however. A key part of Teleo's technology is focused on making calls from a computer to an ordinary telephone, a feature that company executives said would start finding its way into MSN Messenger before the end of 2005.

Brooke Richardson, lead product manager for MSN's communication services division, said: "We've been making a lot of investments in voice but as we looked at continuing... we had that build or buy discussion. We decided that if we wanted to do things rapidly, Teleo was a good fit."

The acquisition underlines the growing importance of voice services, increasingly indistinguishable from an ordinary telephone, to the instant-messaging platforms that have been one of the Internet's most popular applications.

This has tracked the explosive growth of VoIP services over the past few years. Just as VoIP has actually been available for years, voice chat has been an option inside most instant-messaging applications for some time.

However, the growing popularity of broadband and improvements in VoIP infrastructure technology have helped boost the quality substantially. The growth of companies such as Skype and Vonage, and even AT&T's rival service, has helped put net calling on the radar screen for more consumers.

Jupiter Research analyst Joe Laszlo said: "I think all [the IM companies] think that this is an idea whose time has finally come. All of them realise that while voice chatting between IM users is a nice thing, what they really need to do longer term in order to make the platform more viable is make that connection out to the phone networks."

Adding features that call out to ordinary phones could also give the IM companies a new revenue stream, because people are used to paying for phone calls, Laszlo noted.

The Teleo technology will also let Microsoft build click-to-call links into the MSN service, so that local search results — for a pizza parlour or flower shop, for example — can include a link to let the computer call the business directly.

The companies did not provide financial details on the acquisition. Richardson said the Teleo technology would be used primarily within MSN applications, rather than being integrated into the Windows operating system.