Microsoft has acquired San Francisco-based internet telephony company Teleo which puts them in the VoIP telephony battlefield. The financial terms of the deal remain undisclosed. Teleo was founded two years ago and recently launched a beta service.

Microsoft will use Teleo’s technology which will allow users to make phone calls from PCs to landlines and mobiles as well as other broadband-connected PC users. The service will be integrated with Microsoft Outlook and Internet Explorer. Microsoft describes as click-to-call dialing. The software will also be used to supplement existing VoIP features in MSN Messenger.