Microsoft Ends Google's Winning Streak

Updated from 2:03 p.m. EST

In a surprising setback, Google (GOOG Quote) has lost its first major battle in wireless.

A more determined Microsoft (MSFT Quote) has outbid Google for prime turf with telco giant Verizon Wireless, co-owned by Verizon (VZ Quote) and Vodafone (VOD Quote). Windows Live, not Google, will be the default search provider on Verizon phones for the next five years, Microsoft chief Steve Ballmer announced during a speech at the CES show in Las Vegas late Wednesday.

Google, which already has search deals with Sprint and T-Mobile, had been seen as the favorite in negotiations with Verizon.

"This has the potential of being a turning point for Microsoft," says Nielson analyst Roger Entner, who calls the deal "a significant strategic win for Microsoft."

Mobile is very much the future of search and more specifically, a huge market for advertising as heavy Internet use moves beyond the desktop. Google has understood the importance and has amassed a strong winning streak by extending its dominant Web search service to wireless users. Nearly two-thirds of mobile searches are done on Google. Up until now, anyway.

Microsoft didn't reveal any terms of the deal, but it was clear to industry observers that it was a must-win if Microsoft wanted to be a leader in the search business.

"If Google won, everyone else would have had to pack up their bags and go home," says Entner.

The move underscores Microsoft's somewhat fitful attempts to devise an Internet strategy. The Redmond, Wash., software giant spent the better part of last year moving toward and later walking away from a takeover of Yahoo! (YHOO Quote).