A team of analysts from Oppenheimer offered their insight in a research note to investors Wednesday. Breaking down the implications of a Bing search agreement between Apple and Microsoft, the analysis was provided in response to an earlier report alleging that the two rivals are currently in talks to replace Google as the primary search provider for the iPhone, as well as the Safari browser.
Analyst Yair Reiner said the battle lines have been drawn between Apple and Google, though "overt warfare" between the two companies has yet to erupt. He said that the companies are at odds because Apple seeks to be the "special box in a world of generic services," while Google aims to become the "special service in a world of generic boxes." Now, it's possible, Apple's enemy in Microsoft could become its friend with a Bing partnership.
"Cozying up (to Microsoft) could bring more risk than reward, not least because it would clash with the Mac vs. PC campaign and the Apple brand identity that has coalesced around it," Reiner wrote.
For Google, such a deal would be negative in the long-term, but shouldn't come as a surprise to those who watch the technology industry. Analyst Jason Helfstein said users will likely still be able to change the default settings on their device, or download the Google Apps software.
As for AT&T, the exclusive carrier of the iPhone in the U.S., analyst Tim Horan said the discussion serves to highlight the loss of control the wireless provider has over its customer base, thanks to Apple and the iPhone. AT&T is on the losing end because it does not receive any of the revenue associated with software on the App Store, yet is the use of many of those applications that has resulted in poor network quality.
"We believe this will intensify the service providers' promotion of alternative handset suppliers and their own applications market," Horan wrote. "We would expect the service providers to work more intensively with Google, Nokia, RIM etc. to create devices that are comparable to the iPhone, but this will take some time."
Microsoft analyst Brad Reback with Oppenheimer said Microsoft's desire to grow the Bing brand and increase its market share by any means indicates the Redmond, Wash., company would be willing to strike a deal with Apple for the right price. He noted that Microsoft has already released a Bing application for the iPhone.
"We believe (Microsoft) will not grossly overpay so as to negatively impact the future profitability from such a deal," Reback said. "As a reminder, MSFT recently replaced (Google) as (Verizon's) default search engine in a five-year deal estimated to be worth $500M."
Speculation of a potential Apple deal for Bing has arisen in the past, due to the growing tension between the iPhone maker and Google. Some have speculated that Apple could look to remove Google's presence entirely from its devices.
While Apple's non-acceptance of the Google Voice application into the App Store highlighted the differences between the two companies, it could be a sign of things to come. Last year, Apple revealed it was looking to hire someone to create a new and improved Maps application for the iPhone. The current mapping software is powered by Google.
Combined with Apple's purchase of Google Maps competitor Placebase last summer, there remains ongoing chatter that a new Maps application created by Apple could appear in a forthcoming update to the iPhone operating system.