Verizon-Microsoft Marriage Losing Luster


Microsoft's decision to roll out Windows Phone 7 later this year without Verizon Wireless as a launch partner is the latest sign of the sagging relationship between the software giant and its wireless counterpart.

Microsoft and Verizon entered into a five-year deal in 2009 in which the former was rumored to pay the carrier $500 million to provide search and ad services on its network. Then came Android, helping Verizon compete with AT&T in the hot smartphone market through the Droid. Google and Verizon formalized their Android-based romance last October through a pact in which they agreed to jointly develop several Android devices that would come preloaded with applications from both sides as well as outside developers.

Verizon has since continued to ride Android's rapid ascent among smartphone operating systems while Windows Mobile's share has declined. At the same time, Microsoft's main handset partnership with Verizon to date -- the Kin -- turned out to be a disaster, with Microsoft killing the device after only two months on the market.



That experience can't have left either side eager to team up again on another handset. When Microsoft launches Windows Phone 7 during the holiday season, it will only be on GSM networks, which are more common worldwide but will exclude Verizon's and Sprint's CDMA-based networks initially. That gives rival networks AT&T and T-Mobile first crack at phones running the new Microsoft mobile operating system. Verizon is expected to come out with a Windows Phone 7 device next year.

Despite the delay, a Verizon spokesperson this week said its relationship with Microsoft was "solid". And, of course, Bing has become the default search option on most Verizon handsets as a result of Microsoft's deal with the carrier.

But a rumor earlier this month that Bing would be the default search service on all Android phones turned out to be off-base. "We have a relationship with Microsoft and Bing is the search engine on our multi-media phones but we have never said it would be exclusive on all of our devices," Verizon told Engadget.

The Wall Street Journal this week cited Microsoft saying seven new Android phones coming out this fall from Verizon will feature Bing, beginning with Samsung's Fascinate. (The release of that device preloaded with Bing sparked the rumor all Android phones would favor the Microsoft technology.) But none of the new Bing-centric devices will be part of the big-selling Droid series.

The article also underscored that Bing also hasn't yet helped Microsoft make up much ground against Google in mobile search. Only 1.7% of cell phone customers (up from 1.2% a year ago) had used Bing as of July, compared to 14.4% that had used Google, according to comScore.

To the extent Android continues to gain market share, and helps Verizon boost its bottom line, Google will have growing leverage with the carrier. Whether Microsoft can offset Google's deepening relationship with Verizon through Windows Phone 7 is a question that will play out over the next year and after. But Google-Verizon is looking more and more like the mobile power couple lately -- rather than Microsoft-Verizon.

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