(By Mayur Pahilajani - iStockAnalyst Writer)  New York, NY - Shrinking cash flow is leading Microsoft Corp. (NASDAQ: MSFT) to search for alternative venues to increase advertising revenues.

Reports suggest that the software giant is in talks with Verizon Wireless Inc. (NYSE: VZ) to become the default search provider on the wireless carrier's cell phones. Microsoft has been busy raising capital to avert the potential fallout from the financial subprime contagion.

The Wall Street Journal, which was first to report about the agreement between the companies, said the deal with Verizon Wireless would edge out its search engine rival Google Inc (NASDAQ: GOOG), citing people familiar with the matter.

Over the last few months, Mountain View, California-based Google has emerged as a strong player in the technology market. It had recently announced that it will diversify its advertising scope beyond Internet and is preparing to enter new markets including television and mobile communication for additional revenue growth.

Meanwhile, based on the preliminary proposal, Microsoft will get to share advertising revenue with Verizon in response to cell phone Web searches. Verizon Wireless is a joint venture of Verizon Communications and Vodafone Group PLC.

Under the deal, Verizon Wireless would receive guaranteed payments of approximately $550 million to $650 million over the period of five years, which is around twice what Google offered, the people told the newspaper.

Searching information on mobile phone is relatively new for most of the subscribers. The report said around 7.7 percent of cell phone users, or 17.6 million customers, accessed Web search engines through their mobile phone browsers in September, which is based on the data compiled by comScore M:Metrics Inc.

The data showed that Google still leads the online search sector with 60 percent of users opting for its engine, followed by only 36 percent using Yahoo! Inc (YHOO) and 10 percent opting Microsoft.

Mobile phone market may be a difficult sector for the companies to rely its revenue growth. Google generates more than half of its income from online advertising and search engine traffic, higher compared to its competitors.

In separate news, Microsoft is in talks to put its Windows Mobile software in more Verizon devices, the paper said.

The two deals between the companies is being speculated to be more than $1 billion. The details on both the agreements have not yet been made public. Microsoft has emerged as Verizon's favorable company to formulate such deals as the software giant is providing better financial incentives to the telecom company.