Verizon in search deal with Microsoft

By Ritsuko Ando and Sinead Carew

NEW YORK/LAS VEGAS (Reuters) - Verizon Communications Inc has chosen Microsoft Corp to provide Internet search services for cell phones, in what is seen as a blow to rivals Google Inc and Yahoo Inc.

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 details.

The deal follows more than a year of speculation on who would become the default mobile search provider for Verizon Wireless, which is set to surpass AT&T Inc 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.

Jackson said the deal was not likely to change how many Verizon Wireless customers use their phones to surf the Web. 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.