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AOL invests in speech-recognition company

The online giant quietly takes a 1 percent stake in SpeechWorks to develop voice-enabled offerings to its online services.

America Online has quietly taken a 1 percent stake in SpeechWorks, a voice-recognition software company, to develop voice-enabled offerings to its online services, according to a filing with the Securities and Exchange Commission.

AOL will purchase $5 million of SpeechWorks' common stock, or about 1 percent of the company, the document said. In addition, the online giant will receive warrants to marginally increase its minority stake in the company. Boston-based SpeechWorks filed to go public last week in hopes of raising $60.1 million.

The investment will offer more development resources for AOL, and SpeechWorks may get a boost from having the Internet company on its side, according to Youssef Squali, an analyst at ING Barings. AOL can use the technology to diversify its pool of services.

"These technologies provide the potential differentiation that all these companies are striving for," Squali said. "The significance of this for AOL is really that of technology, (rather) than something that's going to have any material impact on short-term revenue."

An AOL representative declined to comment on the investment, deferring to the SpeechWorks filing.

AOL's investment makes it the latest Net giant to begin developing voice-activated services over the telephone. The idea is to use the telephone instead of the PC as a gateway to accessing the Web, tapping into the telephone's larger pool of consumers.

In addition to AOL, AT&T and Internet telephony company Net2Phone took minority stakes in SpeechWorks.

In May, Yahoo unveiled plans to develop voice services, allowing people to access its Web services such as personal email, stock quotes and sports scores over the telephone.

Start-ups such as Tellme Networks, BeVocal and are also offering free Web services over the phone. These companies have caught the eyes and opened the wallets of venture capitalists and telecommunications giants trying to get a piece of the action.

The development and investment deal with SpeechWorks is not the first time Dulles, Va.-based AOL has stepped into voice-recognition services. AOL-owned Moviefone recently added speech recognition to its movie ticketing and listing services.