Microsoft is buying privately-held speech technology company Tellme Networks in a bid to bolster its communications push and to enhance searches over mobile phones.

Financial terms of the deal were not disclosed. Microsoft expects to complete the purchase in the second quarter.

Sources said the two companies were in talks for a deal that could value Tellme at more than $800 million (€604 million), making it Microsoft's biggest acquisition since 2002.

Tellme, which has 320 employees, allows people to use speech to find information on local businesses, driving directions, sports scores, stock quotes, weather and news from the internet.

Microsoft, the world's largest software maker, sees mobile phone searches as a relatively untapped market where it can compete more favourably with Google, the dominant leader in computer-based searches.

"Mobile search is going to be a huge market," said Morningstar analyst Toan Tran. "Search on mobile phones is still up for grabs and Microsoft is a big believer in voice being an interface for mobile phones."

Microsoft also aims to combine Tellme's experience in offering voice services such as automated directory services with its large customer base as part of its push to offer web-based phone systems.

Tellme was founded in 1999 by former Netscape executive Mike McCue.

It provides automated phone services to companies including Merrill Lynch and Federal Express and serves more than 40 million people every month.