The deal is expected to be completed and announced later this week, according to sources familiar with the companies' plans.
Mountain View, Calif.-based Tellme is best known for its service that lets people get Internet information over the telephone, but the company also has a variety of services that businesses can use to offer automated data and directory assistance information via the phone.
A Microsoft representative said the Redmond, Wash., company does not comment on rumors and speculation. Tellme spokeswoman Megan Dyer said "we're still privately held and independent" but declined to comment on any discussions with Microsoft.
In addition to Tellme's existing products, the company has been testing a host of new products tied to the cell phone, including a program that allows users to say what it is they want and have the information sent back to their cell phone as data. Another new product lets people send Tellme a text message with a request, say "pizza places in San Francisco," and get a text message back with options.
Microsoft has been betting heavily on the intersection of the telephony and data communications worlds. In an interview earlier this month, Microsoft Business Division President Jeff Raikesthe role mobile devices will play, as well as the potential for merging voice and data, but declined to comment specifically on speculation that the company would acquire Tellme.
Assuming the deal goes through, Tellme's operations are expected to become part of Raikes' unit at Microsoft. The company has about 320 workers and is led by Mike McCue, a former Netscape vice president of technology.
Tellme was seen as a potential target for an initial public offering last year, though a stock deal never took place, nor did the company actually file registration documents with the Securities and Exchange Commission, a necessary precursor to going public. More recently, the company has been the subject of takeover rumors, including reports that it would be bought by Google or Microsoft.
The company, which is profitable, has raised more than $230 million through rounds of venture capital, the last of which came in October 2000.
Former Microsoft executive Brad Silverberg was.