It appears the war between Apple (NASDAQ:AAPL) and Google (NASDAQ:GOOG) has escalated and to some it may seem that Apple has chosen the nuclear option. According to reports originating on TechCrunch, Apple is currently in talks to expand the breadth and availability of Microsoft services in iPhone OS 4.0. Traditional foes during the original Silicon Valley wars, increasingly Apple has taken a pragmatic, “enemy of my enemy” approach in Silicon Valley War 2.0. How ironic would it be if Microsoft, who once famously injected a 150 million life saving dollars into Apple, was in turn saved by their former nemesis?
Reports earlier this year suggested that Apple and Microsoft had been in talks to include Bing as an iPhone search option or replace Google entirely. If Apple is serious about ridding their operating system of Google-branded products, Microsoft and their Bing division certainly have the services to do it. Bing provides replacements for basic web search, image and video search, news, maps, and visual search. In some cases these products are more highly regarded than similar offerings from Google. Although we shouldn’t expect a wholesale expulsion of Google from the iPhone OS immediately, it certainly sets the stage for further moves if these first ones are successful. Microsoft has hungered for a way to get more eyeballs on Bing and the iPhone ecosystem is certainly prime real estate. Bing already offers a very popular iPhone application, it wouldn’t take much for Microsoft (NASDAQ:MSFT) and Apple to work together to integrate these services into the operating system. This integration could be as simple as letting a user choose which services they want right up to the eventual end game of wholesale Google replacement.
These negotiations with Microsoft demonstrate the incredible acumen with which Apple manages their products. Talking to Microsoft serves two primary purposes. First, Apple gives a company desperate for a foothold in the mobile space a chance for success. Apple is very good at selecting partners who are in need of the boost inclusion provides. Originally it was the music industry with the iPod and iTunes. After that it was the print industry with the iPad. Now Apple recognizes that partnering with Microsoft puts them in a position of power to deal for the services they need. When the iPhone was introduced in 2007, Google was in a similar situation. They wanted and needed a foothold in mobile that Apple was happy to provide. Now that Google has shown its desire to go an independent route, Apple is more than happy to move away from them.
Secondly, it gives Apple options. They can choose to use a contract with Microsoft as leverage with Google or as their exit strategy. If Apple isn’t quite ready to cut the cord with Google they could use an agreement with Microsoft to gain concessions from the search giant. Rumors have circulated about how much Google is paying Apple for relatively exclusivity on the iPhone platform but no hard numbers have ever been revealed. With Bing in their back pocket, Apple could sting their former friends in Mountain View with demands for more money or other concessions to maintain that exclusivity, or at least primacy, in the operating system. By the same token, Apple may well have decided the end has come for their partnership with Google and be readying a phased exit strategy. They’ll gradually introduce Bing-based services into 4.0 and subsequent releases until all traces of Google have been removed. It may be hard to see the break up happen but it may be time and best for both companies to go their separate ways.
What do you think of the Apple – Microsoft negotiations? Will the inclusion of Microsoft services help or hinder the iPhone OS? Do you Google or Bing? We’d be interested in hearing your thoughts on the subject.