March 15, 2007 4:00 AM PDT
Behind Redmond's Tellme deal
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Mobile search is an area in which speech seems like it might be particularly useful because the lack of an easy way to enter information has been a barrier to handling search tasks on a phone.
"With little, little screens (and) bad keypads, speech is just a natural," said Steve Chambers, president of the speech division at Nuance Communications, a company that is both a rival and partner to Microsoft and Tellme in the speech business. Last month, Nuance announced it was buying BeVocal, a company that helps mobile carriers handle customer care.
Tellme recently started testing several mobile products. With one service, for example, people can send a text message to find the nearest Starbucks and receive a text message with a link to a map to get there.
Raikes also pointed to the benefits that speech technology can provide in the world of mobile search.
"The research that we looked at...suggests that more than 35 percent of mobile search users would be more likely to use search if voice were added," Raikes said. And that's just the beginning.
"We think of that as extending even beyond the mobile environment: how you interact with your television, how you interact with your automobile, how you interact with other computing devices," Raikes added.
For his part, McCue had also been envisioning a bigger role for speech and knew it would be difficult for his company to tackle that on its own, even though it was profitable.
"If you look at any IPO scenario, there is no way that it can compare to the kind of opportunity we have to try and take our technology to billions of consumers across any sort of device globally," McCue said. "An IPO is just one step along the way. It takes years and years to really gain critical mass."
The pot of money there for the taking could be enormous. The market for voice-enabled systems at large businesses alone is probably $5 billion, McCue said, with even larger amounts to be made from consumer services such as directory assistance and local search.
McCue had already brought in bankers from Morgan Stanley and Goldman Sachs to help sort through the possibilities. The company had wide-ranging talks with other companies and also explored the possibility of using the proceeds of a stock offering to fuel an acquisition binge of its own.
The day before the Super Bowl, executives for Microsoft and Tellme including Ballmer and McCue, spent most of the day talking. But Ballmer, clearly looking for more details, called McCue at 11:30 a.m. on Super Bowl Sunday asking for another go around. As quick as they could, McCue and his team left the posh Hotel 1000 in downtown Seattle, ran to their Ford rental car and sped across the Lake Washington bridge toward Redmond, Wash.
Though certainly worth the effort, McCue said it was a bit odd to spend the biggest football day of the year in business meetings. "It's like a national holiday, but we were all holed up in Microsoft conference rooms," he recalled.
By the time the executives left the conference room that evening, they knew they were on to something.
"We had already been talking to Microsoft across multiple areas, but this is really when it started to really come together," McCue said. "It became clear this was a serious opportunity for both companies. The next few weeks were largely spent making sure those intuitions--and the numbers on Ballmer's spreadsheet--checked out.
"That was done at a very, very athletic pace," McCue said. Of course, that's coming from a guy who missed the Super Bowl.
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