Microsoft Corp. and Verizon Wireless are in talks to launch a touch-screen multimedia cellphone on the carrier's network early next year, in an ambitious effort to challenge Apple Inc.'s iPhone, according to people familiar with the matter.
The discussions are a gambit by Microsoft Chief Executive Steve Ballmer to energize a mobile business that has lost buzz among consumers and software developers to Apple's iPhone and Google Inc.'s Android.Microsoft is a major player in software for cellphones, but it is working hard to develop a new device that will rival Apple's.
Verizon, meanwhile, is pushing on several fronts to extend its smart-phone offerings and compete with AT&T Inc., which is the iPhone's exclusive U.S. carrier.
Verizon has also had discussions in recent months with Apple about partnering on devices other than the iPhone, people familiar with the matter say.
In a recent interview, Verizon CEO Ivan Seidenberg declined to comment on whether Verizon and Microsoft were planning an iPhone-like device.
Microsoft's project, which is code-named "Pink," aims to produce a phone that will extend the tech giant's Windows Mobile operating system, adding new software capabilities. It would also likely include Microsoft's new Windows Marketplace for Mobile, a store for cellphone downloads along the lines of Apple's App Store, these people said.
While Microsoft is involved in the design of the phone's software and hardware, a third party is expected to build the device, just as Google has worked closely with partners to make handsets based on its Android operating system, some of these people said.
The Microsoft-Verizon relationship is evolving from a search-and-advertising partnership the companies struck early this year. The companies have been working on the Pink project for several months, but haven't yet decided key details such as how the device would be branded, one person familiar with the situation said.Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group PLC, is separately developing its own mobile application store, which it plans to announce soon, according to people familiar with Verizon's plans.
Various companies have their own download stores, but Verizon may add a twist: the company is considering selling applications for businesses, these people said.
AT&T's exclusive rights to the iPhone in the U.S. expire next year, but the carrier is trying to get a one-year extension, people familiar with the matter say.
Apple has had discussions with Verizon recently about its product plans, including a multimedia device that is bigger than the iPod Touch but smaller than a laptop, a person familiar with the situation said. However, the talks haven't become advanced, the person added.
The Pink project is the work of a team of designers within Microsoft's mobile division that includes staffers from Danger Inc., a company Microsoft acquired a year ago. Danger designed the software in the Sidekick, a popular cellphone sold by T-Mobile.
In the past, Mr. Ballmer and other Microsoft executives have said the company doesn't plan to build its own cellphone. A Microsoft spokesman, without commenting on the Verizon talks, said Microsoft hasn't changed its strategy of licensing Windows Mobile to handset makers.
