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Apple Inc. (AAPL), Microsoft Corporation (MSFT): This Tech Giant Is Switching Teams

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Apple Inc. (NASDAQ:AAPL)‘s Siri digital assistant will start using Microsoft Corporation (NASDAQ:MSFT)‘s Bing search engine over Google Inc (NASDAQ:GOOG)‘s when its new mobile operating system comes out later this year. Microsoft appears to be doing a good job exploiting the old saying, “The enemy of my enemy is my friend.”

Apple Inc. (NASDAQ:AAPL)

A Tense Friendship

Apple Inc. (NASDAQ:AAPL) and Google have risen to prominence together, much the way that Microsoft and Intel Corporation (NASDAQ:INTC) did in the personal computer market. However, Microsoft Corporation (NASDAQ:MSFT)’s Windows operating system and Intel Corporation (NASDAQ:INTC)’s chips were complementary products and didn’t compete with each other. Apple and Google, on the other hand, have increasingly competed head on.

For example, including Google Inc (NASDAQ:GOOG)’s industry leading search engine in the iPhone was a necessity when the cell phone launched. However, since that time, Google has become a major player in the mobile space with its Android operating system. In fact, at this point, there are more Android based phones than Apple phones on the market.


On some level, that’s not a problem for Apple Inc. (NASDAQ:AAPL) because it has, historically, made money selling devices. As the device market has matured, however, it has been looking to step into services. Its recently-announced iTunes Radio is an excellent example. The service will help support sales of songs in the iTunes store, but, more importantly, will allow Apple Inc. (NASDAQ:AAPL) to enter the mobile ad space with a popular service.

Online advertising is pretty much owned by Google and its AdWords service. Mobile advertising dominance, on the other hand, is currently up for grabs. In fact, Google highlights this as one of its biggest risks, since the added competition makes selling mobile ads less profitable for the company. That’s one of the factors that helped shrink Google’s margins over the last two years by a whopping ten percentage points.

Priced for perfection, investors should probably lock in gains at Google. When top line sales can no longer cover up for margin compression, investors are likely to jump ship pretty quickly.

A Foot in the Door

Microsoft Corporation (NASDAQ:MSFT) is getting an important foot in the door at Apple Inc. (NASDAQ:AAPL). Although there have been rumors of Apple switching to Bing since the beginning of the decade, this is the first change. It gives the Windows giant a chance to pick up additional traffic and prove to a desirable customer base that Bing is just as good as Google.

If the Siri effort goes well, Apple Inc. (NASDAQ:AAPL) could make Bing the default in its iPhone browser, too. That would be a huge win for Microsoft Corporation (NASDAQ:MSFT) and materially aid its efforts to restart its mobile business. So far, it has launched a new Windows Mobile OS using Nokia Corporation (ADR) (NYSE:NOK)‘s Lumia as a showcase and brought out its own tablet computer, the Surface. Moreover, its new Windows 8 PC OS tries to unify the PC experience with the mobile one.

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