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5 Things about Microsoft TellMe deal

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Microsoft just sent out a press advisory confirming that it is buying TellMe Networks. More details to follow after the press conference which begins in a few minutes. But here are some nuggets which our sources have sent our way:

1. The price is over $800 million but below a billion dollars. Microsoft and Tellme are not disclosing financial details.

2. While Microsoft has been trying to position Microsoft Business Division President Jeff Raikes as the guy who took the lead on this deal, the truth is that Microsoft CEO Steve Ballmer was personally handling this deal. I have confirmed this with two people.

3. Mobile search is the impetus behind this deal, but TellMe is making over $100 million a year from selling automated call-center services to large companies like FedEx.

4. TellMe is going to become an independently run subsidiary of Microsoft.

5. Mike McCue and other senior executives are going to stay with the company. McCue worked at Netscape. Microsoft destroyed Netscape, and now Steve and Bill are making amends, it seems ;-)

Benchmark Capital is the largest outside shareholder in Tellme. By the way, this is another successful exit for The Barksdale Group, a venture fund started by Netscape refugees and their friends. Index Ventures’ Danny Rimer, now the new king of Euro Capital was one of the folks involved with TellMe. Another TBG alumnus, Quincy Smith is now running CBS Interactive, and perhaps teaching the old guys a hip-hop beat or two!

Meanwhile enjoy the previous story.

33 Responses to “5 Things about Microsoft TellMe deal”

  1. S. Johnson

    I am sure the VCs were happy to get something out of this. Tellme could have IPO’d in 2000 or even 2004 to a much higher valuation. Now, although profitable, their revenue growth has stalled (411 calls, which drive most of their revenue, will continue to decline due to free411 and other non-voice substitutes). Customer service has never been a huge business for them and there is too much competition (they are losing big accounts as airlines and banks build VXML expertise). Their cost structure is also higher given their lack of an on-premise solution (every call needs to be routed to their platform). The mobile search product is just a beta. Not sure that an acquisition was the smartest route here for Microsoft.

  2. msearcher

    If this is indeed mobile search related,it just confirms my suspicions that the first wave of mobile search “let’s put our logo+brand up there and have them type the keywords like they are used to” is indeed, despite the commercial-interest-fueled-hype, a big failure.
    A phone is not a PC, never was and never will be.

  3. I am betting this is going to mean more royalty payments to nuance as microsoft tries and pushes it into the mobile handsets? Just a guess – if i hear anything will update the post!

  4. Slim Shady

    Does anybody know how the investors, founders and employees all made out in this deal?

    230+ million is a lot of money to raise. Not sure if it was all in up-rounds, but it seems like the VCs involved probably took a large chunk of the company.

    If the company is profitable, did the investors recoup part of their investment through a dividend?