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Analysis: Microsoft Moves Deeper Into VoIP

Observers expect to see more MSN-integrated consumer applications that include new the Teleo software Microsoft acquired this week.

Its acquisition of VoIP start-up Teleo moves Microsoft deeper into the burgeoning world of Internet communications as the software company said it will combine Teleo’s technology with its existing MSN investments in VoIP.

The acquisition, announced late Tuesday, gives users the ability to click on any telephone number in Microsoft Outlook and Internet Explorer to make telephone calls, Microsoft noted. Financial terms of the 25-person acquisition were not disclosed.

“If you’re a product manager at Google, AOL or Yahoo, you have to be worried,” said VoIP pioneer Jeff Pulver in an interview. “If it chooses to, Microsoft could dominate.”

Pulver said Microsoft could provide more VoIP features on its XP operating system platform, which is SIP-compliant. So far, Microsoft has indicated it isn’t interested in providing traditional telephone service.

In announcing the acquisition, Microsoft noted that it has already integrated VoIP features in MSN Messenger, which has Instant Messaging features. PC users can call each other now on the Microsoft platform. The Teleo technology will enable PC users to make some calls to cell phone and wireline subscribers.

MSN has approached the VoIP market in fits and starts. An earlier effort was dropped because of problems with audio fidelity and connect speeds, but as those problems were solved in recent months, Microsoft renewed its development work in Internet telephoning.

In its announcement, the firm said: “Microsoft plans to incorporate and expand upon Teleo technologies, integrating them into the infrastructure that supports MSN and ultimately projects delivering new VoIP consumer applications in future releases of MSN services.”

The big four Instant Messaging firms – AOL, Yahoo, Microsoft, and Google – are circling each other in the IM arena. While AOL has the head start, followed by Yahoo, Microsoft with Teleo has a new weapon. Google just announced its IM and VoIP entry a few days ago. “Google is interesting here only because it’s from Google,” said Pulver, noting that Google isn’t yet a factor in that market. “It’s the brand that creates the interest.”

Taken together, said Pulver, the Google and Microsoft VoIP announcements as well as one from VoIP pacesetter Skype Technologies represent fresh good news for consumers because they collectively will help bring VoIP to consumers and that’s a good thing. Skype last week announced improvements to its IM offering as well as new open features for software developers to make better use of Skype.

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