(Adds analyst comment, updates shares)
By Ritsuko Ando and Sinead Carew
NEW YORK/LAS VEGAS Jan 7 Verizon Communications
Inc (VZ.N) has chosen Microsoft Corp (MSFT.O) to provide
Internet search services for cell phones, in what is seen as a
blow to rivals Google Inc (GOOG.O) and Yahoo Inc (YHOO.O).
Verizon Chief Executive Ivan Seidenberg said on Wednesday
that Microsoft CEO Steve Ballmer would announce the deal later
in the day at the Consumer Electronics Show in Las Vegas.
Seidenberg, speaking at a Citigroup conference, gave no further
The agreement follows more than a year of speculation on
whom would become the default mobile search provider for Verizon
Wireless, which is set to surpass AT&T Inc (T.N) as the No. 1
U.S. mobile carrier after it closes its purchase of smaller
operator Alltel later this week.
"It's certainly a feather in Microsoft's cap. Tough news for
Google and tougher news for Yahoo," CCS Insight analyst John
Jackson said of the agreement.
Microsoft made a bid for Yahoo last year, but walked away
after they disagreed on price. Investors have been skeptical
about whether the software company can win online advertising
revenue away from Google and Yahoo, which are both stronger than
Microsoft in the Internet search market.
"Microsoft really needed to win that," Nielsen's head of
telecom research, Roger Entner, said about the Verizon deal. "It
gives them a good fighting chance. Otherwise they would have
been almost insurmountably behind Google" in mobile search.
However, the deal was not likely to change how many Verizon
Wireless customers use their phones to surf the Web, Jackson
said. While the details of the agreement have yet to be
revealed, he said Google may have been a better choice to help
Verizon offer personalized Web services, such as delivering ads
that are relevant to users' interests.
"The ultimate goal in mobility is contextual awareness and
the delivery of highly personalized experiences," Jackson said.
"These are competencies Google has in spades, so it may be that
Verizon's customers ultimately end up with an inferior
experience relative to what Google might enable."
Last year, The Wall Street Journal reported the two
companies were in negotiations and that Microsoft would share
with Verizon revenue from advertisements shown in response to
cell phone Web searches. Other previous reports had said Verizon
was exploring a deal with Google.
Verizon shares rose 1.27 percent to $31.90 in on the New
York Stock Exchange. Amid a broad tech slump following a revenue
warning from bellwether Intel Corp (INTC.O), Microsoft shares
fell 6.02 percent to $19.51 on the Nasdaq, where Google shares
fell 3.61 percent to $322.01 and Yahoo shares fell 2.23 percent
(Additional reporting by Tiffany Wu; Editing by Derek Caney and