(By Salman - iStockAnalyst Writer)Software giant Microsoft (NASDAQ: MSFT) has finalized a deal with Verizon Wireless (NYSE VZ) that will make its Microsoft Live Search become the default search service on network's cell phones for the next five years.
If sources are to be believed, Microsoft offered Verizon Wireless between $550 million and $650 million over five years as guaranteed search income, nearly double of what Google was offering.
According to reports, Microsoft is also negotiating a separate deal with Verizon Wireless to install Windows Mobile, Microsoft’s mobile operating system, on more Verizon handsets. The combined value of the two deals could total $1 billion, according to the sources.
The deal comes as a shot in the arm of Microsoft as Verizon Wireless is all set to become the largest carrier in United States, surpassing AT&T, after the acquisition of regional carrier Alltel. In a FCC filing last week, Verizon Wireless said it would complete its acquisition of regional carrier Alltel by Friday, January 9. Verizon Wireless has approximately 78 million subscribers in US.
Mobile search market is expected to expand at a rapid pace, aided by adoption of smartphones and penetration of 3G technology. Citi analyst Mark Mahaney believes that mobile search could reach $2.3 billion by 2010.
According to a study by Nielsen Mobile about 20% of U.S. cellphone users search on mobile. Google leads with a 61% market share followed by Yahoo with a 18% market share. Microsoft ranked third with a 5% market share.
Among major US carriers, AT&T (NYSE: T) and T-Mobile USA use Yahoo! (NASDAQ: YHOO) and Sprint (NYSE:S) Nextel uses Google (NASDAQ: GOOG).
The company also announced on Wednesday a global deal with second largest pc maker Dell that will make Live Search the default search engine and a Windows Live toolbar bundled on the bulk of consumer and small-business PCs sold by the computer maker over the next three years.
Microsoft Senior Vice President Yusuf Mehdi said that the time is right to start promoting Windows Live and Microsoft's search engine. “We’ve gotten to a point where the product is now in a good enough state that we want to start to get it out more formally in front of more customers," Mehdi said. "These two partnerships are very significant for us, because it...gives an opportunity to put our search offering out before a broader audience now in a pretty mainstream way, and I think you should think about it as the first step of us slowly bringing up the dial on how we start to promote our product," he said. Mehdi added “These distribution partnerships are part of our strategy. We know we have to do a lot of other things, including improve the product, including being able to market direct with consumers, and build loyalty and brand around our offering.”
In his first keynote at the Consumer Electronics Show on Wednesday, Microsoft CEO Steve Ballmer also unveiled first beta version of Windows 7. The product is now available to testers, and will be launched to the public on Friday.
Disclosure: Author does not own any of the stocks discussed here.
