31 August 2005 Software giant Microsoft is the latest large technology vendor to show an interest in the nascent Internet telephony market, acquiring a small US-based start-up.

Microsoft has reached agreement to acquire Teleo, which makes technology that allows voice calls to be made over the Internet, for an undisclosed fee.

The move follows Yahoo’s acquisition of voice over IP (VoIP) pioneer Dialpad, and Google’s revelation that it would add Internet telephony to its new Google Talk instant messaging service.

Internet telephony promises to slash the cost of making telephone calls, especially long distance ones, by routing the call over the Internet, rather than the traditional fixed telephone line. Already VoIP services such as Skype and Vonage have attracted millions of users.

Teleo’s technology allows users to make phone calls from PCs to traditional phones, mobile phones and other PCs. Microsoft is expected to integrate the technology with its email client Outlook and enhance the VoIP capabilities of its instant message MSN Messenger service.

“This acquisition opens up infinite opportunities for Microsoft to enable even more relationship-centric communications experiences for our customers in the future,” said Blake Irving, corporate vice president of the MSN platform group at Microsoft.