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Google a Smaller Fish in Mobile World

Stocks in this article: GOOG MSFT VZ

But Sanford Bernstein analyst Jeffrey Lindsay says Verizon is bargaining from a position of strength with both Google and Microsoft.

"Verizon is negotiating its hand very well and forcing them to bid against each other," he says. "With the strategic stakes being so high, we wouldn't say that Microsoft has it in the bag by any means."

Lindsay maintains that Google must win over Verizon if it wants to dominate the mobile Web as it does desktop computers.

"It would be a huge setback for Google if they missed the deal," he says. "It would probably behoove them to do what it takes to make sure they get it."

For Microsoft, whose presence on cell phones is rather limited, a deal with Verizon may be even more essential. Roger Entner, a telecom analyst for Nielsen IAG, notes that although Microsoft has developed a Windows operating system for mobile devices, it is largely reserved for high-end devices and is not tightly integrated with search, a crucial revenue stream.

He further points out that Google is already the default search engine for Sprint (S), and Yahoo! (YHOO) is linked to AT&T (T).

"There's only one dance partner left in the U.S.," Entner says. "Either Microsoft is dancing with Verizon or they're going to sit this one out."

Entner asserts that a loss for Microsoft would be far more devastating than a loss for Google, which has already made inroads on the mobile Web, including the creation of the Android operating system, which T-Mobile has adopted on its new G1 phone.

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