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According to BusinessWeek, Apple has been in talks with Microsoft for weeks. The publication cited two people allegedly familiar with the ongoing negotiations.
Microsoft could also be looking to make Bing search an option in the Safari browser on the Mac. Currently, Google and Yahoo are the only options.
"Apple and Google know the other is their primary enemy," one of the sources allegedly told BusinessWeek. "Microsoft is now a pawn in that battle."
The source also spoke of Apple's interest in serving mobile advertisements on the iPhone and iPod touch. Earlier this month, Apple purchased mobile advertising firm Quattro Wireless for $275 million, a move that was largely seen as an effort to counter Google's acquisition of ad firm AdMob.
Through the deal, Andy Miller, former CEO of Quattro, was named vice president of Mobile Advertising at Apple, a new position for the company which previously had no role in selling ads.
Last week, one report said that Apple co-founder Steve Jobs hopes to "overhaul mobile advertising in the same way they had revolutionized music players and phones." Apple could offer developers the ability to place advertisements in their App Store software, and take a cut of the revenue much like Google already does.
The alleged negotiations with Microsoft for Bing search are another example of the growing rivalry between Apple and Google. Last summer, Google CEO Eric Schmidt resigned from the Apple Board of Directors as an investigation from the U.S. Federal Trade Commission was looking into the connections between the two companies.
Schmidt's move was seen as necessary as Google and Apple now compete in numerous markets in the technology sector: Google's Android mobile operating system competes with Apple's iPhone; both companies recently made large mobile advertising related purchases; Google's forthcoming Chrome OS will see the company enter the desktop computing space; and the Chrome browser competes with Apple's Safari.
The most public dispute between Apple and Google came last summer, when the Google Voice application was not accepted into the iPhone App Store. The two companies shared barbs with Google alleging the software was outright rejected for use on the iPhone, while Apple said it remained under review and consideration.