Tellme Bulks Up

The addition of a former Apple exec to the telco startup's board -- and plans for a partnership with Microsoft - are the latest signs an IPO may be near

On May 8, Tellme Networks announced that Avadis "Avie" Tevanian, the former chief software technology officer of computer powerhouse Apple, had joined its board of directors. The appointment was the culmination of six months of discussions, which began before Tevanian announced his plans to retire from Apple (AAPL) at the end of March, and it could signal a major elevation of Tellme's profile and ambitions.

Tevanian's appointment indicates that Mountain View (Calif.)-based Tellme, whose software and network use voice-recognition technology to help companies manage customer-service calls, may be about to step up the pace of growth. Software whiz Tevanian is famed as the architect of Apple's popular OS 10 operating system. "He is just brilliant beyond words," says Charlie Wolf, an analyst with Needham & Co. who covers Apple and has known Tevanian since 1997.

Tevanian's brain power will come in handy as Tellme, which currently powers automated voice directory assistance for Verizon and Cingular, moves to partner up with Web portals. "I believe their technology could revolutionize the way we use telephones," Tevanian says. "My goal is to really take the company to the next level in terms of their revenue growth and their profits."

Tellme says it is already in the process of negotiating an association with Microsoft (MSFT). While the details of that deal are still under wraps, analysts believe that Tellme's know-how could help Web portals like MSN, Google (GOOG) and Yahoo (YHOO) broaden phone services and dominate the promising, emerging market of mobile search. In the past two years, these portals have begun incorporating Web-calling capabilities into various services. Microsoft, for instance, now lets its search-engine users dial the advertiser's phone right from a computer, using so-called click-to-call functions.


  With Tellme's technology, Microsoft or Google could potentially provide a directory-assistance service while also serving up ads onto the caller's phone, says IPO adviser Tom Taulli. The ads could be tailored to the users' geographic location, provided through the phone's global positioning system. "Microsoft and Yahoo and Google are all companies we could work with," says Tellme CEO Mike McCue. "There are some awesome opportunities."

Such capabilities would require additional technological advancements. That's where Tevanian comes in. Joining longtime staffers, as well as board members like Mohan Gyani, former CEO of AT&T Wireless Services, he'll help map Tellme's technology strategy (see BW Online, 3/13/06, "Tellme's Naughty Schoolboy").

Most industry insiders believe Tevanian will also lend a hand in marketing the products and application to a broader base of companies. "It would be advantageous to have this kind of prestige on their board," says Wolf. "It's like Avie is blessing their technology." That's a useful tactic as companies like Convergys (CVG), Intervoice, Avaya (AV) and Nortel (NT) move into Tellme's territory. The prize: a $2 billion global market that is set to double in size in the next five years, according to Forrester Research analyst Elizabeth Herrell.


  Connections built by Tevanian during nine years at Apple could help Tellme expand globally. In March, the company gave the green light for developers to create voice-enabled applications, based on Tellme's code, for Web-calling provider Skype, which has the greatest presence in Europe. And in 2007, the company is planning a major international expansion, says McCue.

Tevanian's arrival may also presage a long-rumored initial public offering. Lise Buyer, the investment banker who helped shepherd Google through its 2004 IPO, joined Tellme last year. "Several weeks before a company has its IPO, it's not uncommon to bring in board members to add credibility to the company," says Taulli. "You could see a filing happen fairly quickly."

While Tellme won't comment on the timing of a potential IPO filing, McCue does assert that the company's goal is to become "a large, independent, publicly held company." That's music to the ears of investors, who've been waiting at least 1½ years to get a piece of Tellme (see BW Online, 9/12/05, "Tech IPOs Are Clicking Again"). Last year, Morgan Stanley's famed Web analyst, Mary Meeker, told BusinessWeek that Tellme is "one of the companies we're most interested in." And you can be sure that Meeker's interest has been further piqued by Tevanian's arrival.

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