Microsoft Moves Closer on Search Deal with Verizon

Microsoft’s (MSFT) attempts to pull the rug out from under Google’s talks with Verizon Wireless (VZ) seem to be working. According to WSJ – the Redmond-based software giant is getting closer to reaching an agreement with Verizon to become the default search engine on wireless carrier’s mobile phones.

Under the terms being considered, Microsoft would offer Verizon a larger piece of the revenue-sharing pie than Google (GOOG), with guaranteed payments to the carrier of about $550 million to $650 million over five years. That is roughly twice what Google has so far offered.

The Journal also noted, Verizon Wireless is tilting toward Microsoft because the software giant, apparently motivated by its desire to move into Google’s search territory, is offering substantially better financial incentives. However, the largest wireless telecom network in the U.S. is still weighing its options and remains still in discussions with Google. The situation is fluid with both companies, the paper said.

Separately, Microsoft is also negotiating a deal aimed at putting its Windows Mobile software in more Verizon devices although it isn’t clear yet if Microsoft is offering to pay Verizon to use Windows Mobile or would allow Verizon to use the software for free.

It seems Google’s preoccupation with the Department of Justice over the Yahoo (YHOO) search-ad partnership helped create the opening for Microsoft with Verizon.

The move comes as the two companies intensify their efforts in the mobile arena.

The mobile search market is still new and very theoretical to most consumers. Only about 7.7% of cellphone users accessed Web search engines through their mobile phone browsers in September, according to comScore (SCOR).

Roger Entner, a telecom analyst with Nielsen IAG, said deals like Verizon’s are an opportunity for Internet companies to leap ahead of rivals. “This is a market that hasn’t been divided up yet.” {WSJ]

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