Jeff Raikes: News Conference Regarding Microsoft Acquisition of Tellme Networks

Transcript of Remarks by Jeff Raikes, President, Business Division, Microsoft Corporation, and Mike McCue, Co-Founder and CEO, Tellme Networks
News Teleconference Regarding Microsoft Acquisition of Tellme Networks
March 14, 2007

BILL COX: Well, good morning, everyone. This is Bill Cox from Microsoft Corporate Communications. I would like to thank you for joining us today for some very exciting news. By now most of you know that we are making an announcement this morning, and you’ve probably seen the press release, Microsoft intends to acquire Tellme Networks.

Here with me today, I have Jeff Raikes, President of the Microsoft Business Division, and Mike McCue, CEO and co-founder of Tellme. Jeff and Mike will spend about 15 minutes talking with you about the significance of the acquisition to both companies and the industry. We will then open up the lines for Q&A.

With that, let me turn it over to Jeff Raikes.

JEFF RAIKES: Super. Thanks, Bill.

I’m really pleased to be here with you today, and I’m certainly here to be here with Mike as we’re announcing Microsoft’s intent to acquire Tellme Networks. You know, at Microsoft we really see speech as a universal, simple capability to open up the potential of computing. We see it as a very important interface, a very important experience. And we think voice enabled capabilities are going to provide incredibly important services in the years to come, as they already are today, and Tellme has certainly proven that.

What we’ve done is, we’ve focused in on the areas of natural input, inking, handwriting, and also speech technologies for at least the past decade. Speech recognition capabilities within Windows Vista, speech capabilities in Exchange 2007 with Unified Messaging. We also have Microsoft Voice Command for Windows Mobile devices and products, and we have our Microsoft Speech Server.

What we are doing with the acquisition of Tellme is really the right thing for our customers, because it allows us to extend the speech platform, creating an even richer capability for partners and ISVs to build speech enabled solutions. In addition, it’s going to build on our vision of software plus services. In this case, it can be the Windows client speech capability plus the Tellme Service, or Microsoft Office communications capabilities with the Tellme Service. So what we’re doing here is, we’re really combining Tellme’s speech expertise, and their work in the mobile environment, their work in the enterprise IVR environment, the work with directory assistance, so that what we can do is, we can accelerate our progress, whether that be local and mobile search, or whether it be how we help companies more effectively serve their customers. It also gives Microsoft a great opportunity to expand our UC offerings through hosted customer care solutions, and address the business requirements of customers, whether that be Federal Express, American Express, American Airlines, Dominos Pizza, all great customers of Tellme’s capabilities.

So, in short, this acquisition really marks a very important step forward in our strategy for delivering software plus services that will put people at the center of communications to help improve their productivity, and their solutions within the office, as well as at home, and on the go. It’s always exciting when you see somebody who has built a company, that team shares your vision, and we want to come together, and clearly that’s been the case with Mike. Mike has done a terrific job of building Tellme Networks into a great business today, and what we want to do here at Microsoft is to work with Mike to take these solutions even further.

In fact, let me turn it over to Mike so he can share more.

MIKE McCUE: Well, thank you very much, Jeff.

Today is a very, very exciting day for my team and I. We have been working for eight years to bring together the vision and the technology necessary to allow anybody to just say what they want and get it from any telephone anywhere in the world. This combination allows us to really fulfill our vision and bring it to billions of consumers, literally, on any phone. We love the idea of allowing people to be able to simply pick up a phone, push a button, and say find the nearest Starbucks, and then get a map and driving directions to that location, or be able to push a button and say, give me the latest score on the Yankees, or say call mom at home.

Voice is a very, very powerful interface that’s not just great for the phone, but also for lots of different devices, and that’s another really great reason why we thought it would be great to combine with Microsoft. Microsoft has a fantastic presence already across a range of devices, whether it’s the PC, the television, MP3 players, the car, so for us, as a team, this is really the beginning of us being able to take our technology and everything we’ve built over the years to billions of consumers across all sorts of devices, and we couldn’t be more excited.

BILL COX: Thanks, Mike and Jeff. With that, we will open it up for Q&A.

QUESTION: Yes. Can you say what sort of revenues Tellme is generating now, and is the company profitable?

MIKE McCUE: Yes. The company is profitable. We are privately held, so we don’t disclose our revenue. But the company has been very successful over the years in working with some of the largest companies in the world to help them allow them to interact with consumers, and their customers over the phone more easily. We built a terrific business doing that. We now have about half of all directory assistance calls are processed on our voice platform, and roughly one in three Americans use Tellme every year to get things done. You might not know it, but it’s a Tellme technology powering a lot of these services, whether you call American Airlines to get flight information, or you call Dominos to order a pizza, it’s our technology underlying that that has been powering that, and powering our business. So that’s about I think, as a result, it’s created profits and good success for the company.

QUESTION: Also, the decision not to report the financial terms on this, why not report the financial terms?

JEFF RAIKES: Well, by Microsoft policy, we don’t disclose the terms, especially when it’s a private transaction.

QUESTION: Can you at least say whether or not this reported $800 million value is within the ballpark?

JEFF RAIKES: We don’t have any comment on the terms.

QUESTION: Hi, guys. This looks like an extremely attractive announcement. Are you going to actually put up a hosted voice service that customers can use as a piece of technology to combine with something that they want to use as an application, or is this technology going to be hosted by customers and ISVs who are, themselves, putting up services?

MIKE McCUE: Well, it’s a combination of both. Tellme has a voice platform that’s now the largest hosted voice platform in the world, and that’s used by a range of companies right now to build all sorts of applications. Tellme also builds a flagship consumer service that allows you to just say what you want and get it from any phone. And so one of the things that we’re excited about is now, working with the various product teams across Microsoft, to be able to build applications, extend their existing applications using voice on this platform, and also build entirely new applications.

QUESTION: Hi, guys. I have just two questions. One of them is if you could explain a little bit more how you plan to integrate this acquisition into unified communications, particularly since you’ve already demonstrated a lot of voice recognition features of that. And also, Jeff, I was hoping you could explain a little bit more when you mentioned the applicability of this to software plus service with regards to Office.

JEFF RAIKES: OK, great. So relative to our efforts in voice and unified communications, we see this as a way to really enhance and accelerate what it is that we can do. First of all, you have the proven capability of the number one platform in the world for hosted speech-enabled solutions, and it’s being applied today in great examples of enterprise IVR. Obviously, in the world of unified communications, that’s one of the key capabilities that our customers are looking for. And so we think the strength of Mike and his team, and Tellme are really going to enhance what we can do in voice and unified communications by bringing that experience in enterprise IVR and potentially opening up new types of offerings that we can bring to our customers.

In addition, we fundamentally see voice and speech recognition as a way to improve the interaction with productivity software. Last week at VoiceCon, I mentioned that we expect within three years that 100 million people or more will be enabled to do quick call right from within their applications. So that’s an example generally of how we see voice as a way to enhance the experience. We think speech recognition will certainly be a part of that. People are on the go, they want to use their mobile devices, they want that productivity experience to carry over to that. They want the ability to use voice as a way to interface there, whether it be to access information, or whether it be to connect with colleagues. And so we are going to look very broadly together with Mike at how we can extend the great work that they’ve done more broadly in the Microsoft product line, whether that be Microsoft Office, whether it be what we do in the online services business, in the consumer world, we see tremendous potential because of the role that speech is going to play as a natural interface.

MIKE McCUE: And I would add that this, in many ways, to me, represents the Dial Tone 2.0. The fact that right now the phone has been relatively unchanged in decades, the fact that you still pick it up today and you hear two tones meshed together as the dial tone, and that you have to type in a bunch of numbers to get something done, or to reach somebody. We think that that world is ripe for change. We think that when you pick up a phone, the phone should ask you, what do you want to do, who do you want to call. And you can say what you want, you can say call mom at home. You can say call Mike on his mobile phone. You can say call Mike and Jeff, and have a conference call immediately happen. So we think that from a unified communications point of view, this is incredibly exciting. It’s a great way to advance what the phone is capable of, and how easy it is to work with the phone.

QUESTION: Good morning, guys. Say, Jeff, does this signal Microsoft’s intent to begin acquiring more and more companies to bolster its search efforts?

JEFF RAIKES: Well, certainly, I think you know that we’re always looking at acquisitions that can help to bring great people to Microsoft, the technology they’re associated with, and extend our progress. We look at that across our product lines. You know that I’ve done acquisitions on behalf of Microsoft in business applications, in business intelligence, in the communications space, and we’ve certainly, my colleagues leading the other divisions have similarly done acquisitions. One of the great things about Tellme is that their impact won’t be just within the business division or our Unified Communications Initiative, it’s going to extend broadly across the company.

Certainly we’re always looking at the opportunity of great companies that can be a part of the Microsoft team, and extend what we do. We don’t have anything specific to announce at this point in time beyond Tellme, because Tellme is the star of the day.

QUESTION: Hello, guys. I’m still a little confused here as far as what the value add here to what Microsoft’s already done in the speech area? I mean, you’ve had a speech server, and now you’re rolling speech server into Office Communications Server, which is due out in the short timeframe. And I would kind of like to get a feeling of what this is adding that you haven’t already been working on in the speech area, and what sort of product form that would take? Clearly, it’s too late for Office Communications Server, but what does this really imply going forward?

JEFF RAIKES: Maybe I’ll jump in here, and Mike is going to be free to add. Obviously, we do have great investments in the area of speech, and we’re out there with unified messaging and Exchange 2007. We’ve got our work that we’re doing on Voice Command with the Windows Mobile devices. We have speech recognition that’s integrated in with Office and Vista.

So, why Tellme? Because Tellme has the best hosted services platform for speech-enabled solutions today. It is the number one in the world. It is used by lots of companies, millions of people every month, 40 million in fact. So what that means is, their investments in speech recognition and voice will enhance our own technologies, open it up to more partners, more ISVs, and be able to take advantage of their real world experience in areas like enterprise IVR. So it’s really their proven experience, both in developing the technology, and using it with customers, and using it in ways where, you know, today, for example, with enterprise IVR, we are not significantly invested. We have some underlying technologies, but Tellme is the one that has the number one hosted services platform for speech solutions. And so it’s really the merger of those strengths that helps to accelerate the impact that we can have in the marketplace.

MIKE McCUE: And what I would add is that one of the things that we are excited about with Microsoft is that they really believe in providing software as a service, and that’s something that’s a vision that we have shared at Tellme. One of the things that’s great about speech as a service is that the more it is utilized by more people, the more it learns, and the more it adapts, and it gets smarter and smarter. So speech is a natural thing that you want to be able to provide as a service with tens of thousands of processors in the network being able to process different speech utterances.

Last year alone, we did almost 10 billion speech utterances. In other words, somebody said something to one of the applications on our platform 10 billion times last year, and so what that has allowed us to do is to make the speech platform smarter, and better, and more capable so that the experience is better and better for consumers, and ultimately for businesses, saves them more and more money, and provides better experiences for their customers.

QUESTION: Yes, hi. I’m just wondering, the press release talked about combining Windows Live Search with Tellme. I mean, can you explain what that might look like, and also talk about platform perspectives, global platforms?

JEFF RAIKES: We had a hard time hearing you, I want to play back the question to make sure we got it. I think you asked about a comment in the press release associated with Windows Live Search coming together with Tellme. Is that correct?

QUESTION: Yes. That’s right. Sorry, I was on a headset, it was probably not very good.

JEFF RAIKES: Yes. No problems. It sounded like the lawn mower was going in the background there.

QUESTION: Well, I am in New York.

JEFF RAIKES: We have already got great investment in Mobile Search, our local search activities. We think this can be dramatically enhanced by what you can do with voice. And so I know Mike is very excited about that.

MIKE McCUE: We think that one of the critical things with search, particularly on the phone or especially in you car is that you should be able to use voice as an interface to be able to find things easily. People who have a phone are on the go typically, they don’t want to be able to have to type things all the time to get what they want. So we really like the idea of allowing consumers to just say what they want and get it. For example, say call mom at home, say Yankees and get a score, say find the nearest Starbucks and see a map and get driving directions in your car. We think that’s really important. It’s almost kind of like the mouse was to graphical computing, we think speech is to mobile computing.

QUESTION: I agree with your perception of speech as a powerful input, natural, and so on. However, for output it isn’t always the best thing to do, especially if it’s a lot of information. So would you like to comment on what the impact of using speech input rather than buttons will have on the next generation of phones, both at the desktop and mobile, that will exploit the visual interface as well as the voice input interface?

MIKE McCUE: Yes. One of the things we are really excited about is the idea of combining a voice and visual interface. Tellme just released Tellme By Mobile. If you go to our Web site, you can check it out. It’s pretty cool. It’s a cutting edge application that you can download on your phone, and basically what you do is, you say what you want, and then you can actually see the results on the screen, and you can see a map, and you can see driving directions. It’s very, very easy to use. You can also type as well, if you want, if you want to be quiet and you’re in a quiet environment. So you can use either text or voice as input, and ten you can see the results on the screen. And we think this is representative of how things will ultimately work as the phone gets more and more powerful as the computing device. And similarly with cars, and with the PC, with your television, why do you need to navigate through all these menus on TV when really you should just be able to say, show me The Daily Show, and now you’re watching what you want to watch on TV just by speaking to it. So this voice and visual interface, we think, really represents the future, and we’re very excited about it.

QUESTION: Guys this is a pretty exciting announcement. Right now, Tellme is using speech technology from a vendor other than Microsoft, are there plans to integrate Microsoft’s speech technology into the offering?

MIKE McCUE: Yes, one of the things that we did is, of course, we made our platform work with multiple speech recognizers, so that we could bring to our customers the best speech recognition technology possible at any given time.

Now, obviously Microsoft has a fantastic recognizer, and one of our goals will be to figure out how to integrate that into our platform, and to advance the state of the art in speech. I think speech, as a technology, has all sorts of potential that’s still untapped, and we’re very excited about being able to provide a new kind of platform for speech technology, and a new set of applications for speech that will cause all sorts of R&D around the core speech recognizer, and really provide some breakthroughs, I think, in the end.

QUESTION: I think what I’ve heard here is lots of vision about how these two – how you can leverage the assets of TellMe, and it’s all good stuff. But, I wonder, have you got any specific new service offerings that you weren’t going to do before that you can tell us about, and give us some idea of when they’ll be offered. And the second question I’ve got is that TellMe has always been a strong advocate of VoiceXML, whereas Microsoft has been a somewhat reluctant adopter. I’m wondering, where are you going to stand with VoiceXML, are we going to see SALT resurrected, or is this finally the signal that Microsoft is getting on the VoiceXML program?

JEFF RAIKES: Great. Well, Steve, your first question, obviously, Steve, what we need to do is get through the regulatory process, and as a part of that TellMe is going to continue to operate independently. As soon as we get to closure on the acquisition, which I expect would be probably within about 30 days, we want to follow up with some of the ideas that we’ve kicked around. And I think probably what you’ll hear from us, say, in the next 60 to 90 days will be some of the things where we actually can clarify and make real the ideas that we have for further involvement.

We certainly have given you a sense of the things that we think are possible. For example, the ability to use this in the context of our voice and unified communications efforts, and what we’re doing in the world of Office productivity, and what we’re doing in the world of local and mobile search. So those are some specific areas that we’ve already identified along with the use of TellMe’s – or Microsoft Research’s speech recognition technology with TellMe. That also is another opportunity to explore. So we expect that we’ll finalize those first wave of plans within about 60 to 90 days.

MIKE McCUE: And with respect to the VoiceXML and SALT question, we remain very committed to VoiceXML, and you will see us continue to do that. We think VoiceXML is a very, very important open standard. Our customers rely on us continuing to not only committed to the existing open standard, but also to drive it forward. Microsoft has done some very innovative work with SALT, with respect to multi-modal or voice and visual interfaces. We’re excited about that. The next big step for VoiceXML is this voice and visual combination that I was alluding to earlier.

So one of the things that we’ll be doing is continuing to work directly with the W3C like we have in the past to advance VoiceXML. We’ll bring some of our ideas to the table, some of the SALT ideas to the table. There are other ideas that other companies are bringing to the table, and we’re going to go ahead and expand VoiceXML and what it is through the standards process, and that way our customers will always feel like they’ve got choice, they’re not locked in, they can build applications that run on our platform, and ultimately our goal is to earn their business through the power and capability of the platform, and what it does for their customers, rather than trying to lock them into any kind of proprietary technology.

So that’s our vision and that vision will continue on, and we’re very excited that Microsoft supports that.

QUESTION: A question for you, I wrote an article a couple of weeks ago about the lack of speech recognition capabilities used by the end points in a UC environment. This certainly is going to solve that problem the question is what kind of timeframe do you think you’ll see that enhance, so people can actually do voice dialing from their phones?

MIKE McCUE: Well, voice dialing in the unified communications area is critical, and it’s sort of a core capability on which you can also provide all sorts of other capabilities. So we’re really excited about being able to provide, if you will, enterprise dial tone. So you can pick up your voice over IP phone, and on the other end instead of hearing two tones meshed together, which is the way it’s been for decades, instead you’ll hear a question, who do you want to call. And you can say, call Jeff on his mobile phone. You’ll be able to say call Jeff and Mike on their mobile phones, and we’ll create a conference call. This is the kind of technology that we’re really excited about.

In addition, all of the integrated messaging, unified messaging, whether it’s voice or e-mail, presence information, instant messenger, these are things that we’re really excited about, because now you’ll be able to use voice to navigate through a lot of the kinds of information that you would normally only be able to see on a PC, you’ll be able to get on any phone.

JEFF RAIKES: Jim, I think you know, we think telephone numbers are an artifact of technological limitation, and our goal is to try and move away form that, and have the experience be natural throughout the voice and unified communications area, whether it be the way in which you can click to connect with people, or the ability to use voice as a way to access people. You know we have voice command today with our mobile devices, we need to extend that further throughout the voice and unified communications area. Tell me is going to help us do that.

QUESTION: I have two questions today, both about TellMe’s current business. The first is, can you say a little more about the international markets, and languages that you folks support. And the second is, if you could reveal a little more about the business today, specifically the revenue split between – is it service revenue, is it product revenue, or is it really licensing of technology revenue? Thank you.

MIKE McCUE: OK. Well, I’ll start with your first question. TellMe works with some of the largest companies in the world. They’re international companies, companies like FedEx, UPS, American Airlines, and so on. So, yes, international capability is critical to our customers, and this is an area that we have done some work in, but frankly being able to do this now as part of a larger company is very, very exciting to us. Being able to take our technology globally, in particular with voice over IP, and the promise of what we’ll be able to do to back call calls, for example, from Europe to our data centers here in the United States, is very, very exciting, and our customers, I think, are going to love that.

Then in terms of our revenue split, I mean, we’re a private company, so we don’t really breakout our revenue right now. But, I can tell you that what we do, we process about 2 billion calls a year, last year, on our platform. And we get paid for every one of those calls. And our customers – the reason why customers pay us for that is because they really need to have good, strong interaction with their customers on the telephone, and be able to satisfy customer requests, transaction requests, for example, getting flight information, or getting a directory assistance lookup. And when you do that well, businesses are able to make their customers much more happy, and so that’s really been the core of our business. We’re excited about expanding that, and extending that going forward with Microsoft.

QUESTION: Hi, one follow up question on my earlier question, guys. What is the message now to ISVs and other developers, corporate developers, that were building on top of the speech server platform, and trying to build some add-on, or products that integrate with Unified Communications Server – excuse me, Office Communications Server and Exchange 2007? Now that you’re acquiring this technology, what’s the message to them, and what should they be doing in terms of trying to figure out where to go with APIs and so on?

JEFF RAIKES: Certainly what we want to do is use the TellMe technology as a way to enhance and extend what our developers can do. There, no doubt, will be some things that we’ll want to rationalize as we get into the roadmap. Today TellMe has tremendous strength in terms of hosted solutions. I’d say most of the speech server solutions today tend to be on-premise. I think the thing to do is to look forward to the next few months, where we can help these ISVs, these developers understand how the combination of the technologies will enhance what they can do.

I don’t think that will take us a long time. I think we each have a good understanding of the technologies, and we’ll be able to come out with messages that allow, and a road map that allows these developers to build on what they’ve put in place.

MIKE McCUE: Yes, and I think that’s well said. I would add that distributed speech recognition across both on-prem and a hosted network is also something that we’re excited about. It may not make sense to do every single speech utterance in the network, maybe perhaps also some locally handled. That also goes, by the way, for the mobile phone, you might want to do some of the simple speech processing on the device itself, and then for the more complex stuff, like a business search, be able to do that inside the network. So we think that being able to have a distributed platform that has the ability to have some local speech recognition, as well as speech recognition in the network is a powerful vision, and that’s one of the things that we’ll be looking as we start to integrate.

QUESTION: Hi, I was wondering how important this acquisition is for Microsoft’s mobile division, and specifically I was taking a look at the TellMe by Mobile application and I was wondering if TellMe already had any partnerships with any carriers, or any search partners on that?

JEFF RAIKES: Certainly one of the key attractions fro us to come together with TellMe was their vision for using their technologies in the mobile search area. We have great strength there with our mobile search and local search. Frankly, today TellMe already does more mobile search support than Google and Yahoo combined. So you’ve got a great asset in what they’ve already done, in terms of their experience, their expertise, and what we’re doing is we’re having great – we’re looking forward to great conversations that we’ll be able to have in the mobile search area.

MIKE McCUE: Yes, we partner with the carriers, pretty much every major carrier in the United States today. And this is an area now that allows us to expand these partnerships. Carriers are really looking for innovative new mobile search technologies, and solutions right now, and they’re really looking for ways to differentiate, and this is something that we think we’re going to be able to let them do now with some of these capabilities.

QUESTION: I wanted to focus very narrowly on an area that you’ve been talking about speech recognition and certainly that’s where TellMe has focused most of its efforts, but it has for the past couple of years been moving very, very strongly into providing security, including speaker recognition. And I know that Microsoft has periodically made announcements of interest in that area. And I was wondering what’s happening either separately or together in that arena?

MIKE McCUE: Well, you’re referring to voice verification?


MIKE McCUE: Yes, that’s a technology that we’ve always been excited about, but it’s still a little early. And one of the things that we’re excited about is, now we can really get a chance to work directly with the researchers at Microsoft, and start to advance the state of the art in voice verification and speech recognition overall. There’s a tremendous amount of promise there, to be able to recognize someone based on their voice, and there are all sorts of applications like that. And so, yes, this is a very, very exciting area for us.

QUESTION: Jeff, you said earlier that from a statistic, you said 100 million-plus people will probably be doing quick calls from within their applications in about three years time. Are you saying that you believe that Vista business users by, say, the year 2010 will have a kind of a voice interface to be able to acquire statistics, or information, or to do other functions from within, say, Excel or Internet Explorer, and when they do so, will we be calling it Microsoft TellMe, or will we be calling it Microsoft Voice, and will we be calling the applications from which they do this the next version of Office?

JEFF RAIKES: Yes, so let me clarify. Last week at Voice Con, the big industry event and tradeshow for the voice over IP industry, I predicted that within three years there will be 100 million customers, or users of Office tools, business applications, that will be enabled to do click to call. Now, what click to call means is, take the Office Communicator capability that we offer today, the ability to initiate a voice call right from within the application that they’re using. Now in that case that would be a click, but that also could be a voice command to initiate that call.

My fundamental point was really that voice communications needs to get integrated into the context of how people do their work, and that’s the direction that we’re going. We certainly see TellMe and their strength as a part of enhancing that overall direction. One of the key things that I talked about at the show last week is the ability to do to have communications enabled business processes. Well, in many ways TellMe is already doing that today. They’re doing that with a wide range of customers where they’re actually using their speech recognition platform as a way to have a business process that is enhanced by communication using mobile devices, using the phone, to connect in and do customer service, customer care.

So it’s a very, very broad area and my key point was really that you’re going to see a wide range of integration of communications technologies into the fundamental information work, productivity and business applications infrastructure.

BILL COX: I want to thank everyone for joining us on the call today, and also thanks to Mike and Jeff. I hope you enjoyed the teleconference todAy, and we’ll look forward to talking with you in the future.


MIKE McCUE: Thank you, everyone.

JEFF RAIKES: Thanks, everyone.

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