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Apple, Microsoft talks reported

Bloomberg News / January 21, 2010

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SAN FRANCISCO - Apple Inc. is in talks with Microsoft Corp. to replace Google Inc. as the default search engine on the iPhone, according to two people familiar with the matter.

The talks have been underway for weeks, said the people, who asked not to be identified because the details aren’t public. The negotiations may not be concluded quickly and might still fall apart, the people said.

The discussions reflect the intensifying rivalry between Apple and Google, currently the main search engine on the iPhone.

While the companies have worked as partners in the past and Google chief executive Eric Schmidt served on Apple’s board, they now compete in markets such as mobile phones.

Google introduced its Nexus One phone this month and offers a mobile operating system called Android.

“To the extent that it threatens Google, such a deal would be good for Apple,’’ said James McQuivey, an analyst at Cambridge, Mass.,-based researcher Forrester Research Inc.

Apple is also working on ways to manage ads displayed on its mobile devices, a move that would challenge Google’s advertising business, one of the people said.

Frank Shaw, a spokesman for Redmond, Wash.,-based Microsoft, and Katie Cotton, a spokeswoman for Apple, based in Cupertino, Calif., declined to comment. Google spokeswoman Katie Watson also declined to comment.

A deal between Apple and Microsoft would likely mean iPhone owners would automatically get Microsoft’s Bing as the main search engine, possibly requiring them to actively change the phone’s settings if they want to search using Google.