12:25 PM

BusinessWeek: MSFT Might Replace GOOG On iPhone - (It's The Money Not Rivalry)

On BusinessWeek, Peter Burrows and Cliff Edwards report:

Apple (AAPL) is in talks with Microsoft (MSFT) to replace Google (GOOG) as the default search engine on its iPhone, according to two people familiar with the matter. The talks have been under way for weeks, say the people, who asked not to be named because the details have not been made public.

Foremski's Take: The story says that the discussions are due to " accelerating rivalry between Apple and Google."

I don't buy it. Yes, there is some increased rivalry but on the Internet, that's increasingly true of many companies. This is more likely a financial decision.

Apple receives tens of millions of dollars a year from Google for search traffic from the iPhone and also from users of the Apple Safari web browser. Microsoft is most probably using its cash hoard to muscle its way onto the iPhone, and maybe even become the default search engine in Safari.

We might see Microsoft do the same with Mozilla and bid to become the default search engine on Firefox.

The rivalry explanation doesn't hold water.

MSFT a larger business rival to APPL than GOOG. MSFT has a rival OS, it has Zune a potent rival to the iPod; it has a mobile OS that is on many cell phones; it has many competing applications.

Apple is paid by Google to provide search traffic and to provide prime placement for features on the iPhone such as the YouTube app (which cannot be erased by the user). Industry sources have said that Apple receives enough money from Google to fund most of its OS development.

Whether it gets those funds from Google or Microsoft -- it doesn't matter to Apple. This is purely a business decision.