updated 8/30/2005 11:19:42 PM ET 2005-08-31T03:19:42

Microsoft Corp. said Tuesday it had acquired Teleo Inc., a small San Francisco startup whose software lets people make calls from computers to traditional telephones.

The deal for privately held Teleo, which closed Monday, could allow Redmond-based Microsoft to gain a competitive edge in the growing market for Internet-based calling services. Terms were not disclosed. (MSNBC is a Microsoft - NBC joint venture.)

Microsoft already uses Voice over Internet Protocol (VoIP) technology in some products, including its instant-messaging program.

But Teleo's technology, still in development, is notable for such features as click-to-call: a user can click on a phone number — listed, say, on a Web page — and immediately reach someone with a regular phone number on the circuit-switched network.

Blake Irving, a corporate vice president with Microsoft's MSN Internet division, said Microsoft hopes to incorporate Teleo's technology into such consumer products as its instant-messaging program.

The company also is looking at other options, such as making it part of a localized search engine offering. A person looking for a nearby restaurant could, for example, search for area eateries and then use the technology to call and make a reservation.

Irving said Microsoft plans to charge for some services using Teleo's technology while others will be free.

A test version of the product is expected to come out sometime this year, he said, and details such as how much services would cost have yet to be worked out.

Copyright 2005 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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