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Apple may be looking to exact revenge for Google's launch of supposed iPhone-Killer Nexus One.
Microsoft and Apple are said to be discussing a deal that would see Microsoft Bing become the default search engine on Apple's iPhone.
The move, according to a published report, would result in the ouster of Google as the main search portal on the iPhone.
Apple may be looking to ditch Google from its devices in response to Google's launch of an iPhone competitor, dubbed Nexus One, earlier this month, according to BusinessWeek. The story said Microsoft might also be looking to make Bing the default search tool on Apple's Safari Web browser.
Like the iPhone, the Nexus One features downloadable apps and an interactive touch screen. But unlike Apple, Google plans to sell an open version of the $529 phone that's not linked to a specific carrier.
"Apple and Google know the other is their primary enemy," said an anonymous source quoted by BusinessWeek in a story published Wednesday. The magazine said the source had knowledge of Apple's plans.
It was not immediately clear how much traffic the iPhone generates for Google, but the number could be significant as the iPhone dominates the North American mobile device market.
Microsoft and Apple officials didn't comment for the story.
If such a deal plays out, it could provide a marked boost for Microsoft's search business. Bing captured just 10.7% of all U.S. search traffic in December, according to market watcher Comscore, while Google, the number one player, took 65.7% of all traffic. Second place Yahoo grabbed 17.3%.
Microsoft already has a deal in place to add Bing to Yahoo's Web pages.
Microsoft shares were off 2.03%, to $30.47, in morning trading Wednesday. Apple was down 1.65%, to $211.49, while Google was off by 1.41%, to $579.35, as the markets opened lower on concerns about bank earnings.