Apple Vs. Microsoft: In Search Of The Battle Royale

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 |  Includes: AAPL, ADTM, MSFT
by: Daniel Todd

Apple (NASDAQ:AAPL) might just be looking over its shoulder after the news that leading mobile app search and recommendation company Mimvi, Inc. (MIMV.OB) has finalized a partnership agreement with Microsoft Corp. (NASDAQ:MSFT) to develop a number of products and services to complement Microsoft's Windows Azure and Windows Mobile 8 Platforms.

Apple acquired Chomp for $50 million earlier this year to beef up its own search and recommendation capabilities and has incorporated some of the acquired technology in its recently released iOS 6. In particular, the new App Store features large swipeable cards for browsing through apps and bringing the "Genius" more center-stage. The Genius will utilize data it has on apps you have already downloaded to recommend other apps for you. However, recommendation has not been a strong suite of Apple's to date and users can find themselves swimming in a sea of apps on the App Store. There is also the fact that Apple's search algorithm works on the ranking of apps and many so-called "zombie" apps simply fail to appear in the app store.

The two deals point to the fundamental underlying difference between the two companies approach to search and recommendation. Apple remains a closed system. You have to have an iPhone or iPad to use the iOS 6 operating system and buy products from its App Store. Microsoft Windows 8 will run on any PC, tablet or Windows mobile device.

As well as outright acquisitions, Microsoft forms strategic partnerships with companies and makes strategic investments in companies, while Apple buys companies and incorporates their technology into their closed architecture. In fact, Apple only exists today because in 1997 Steve Jobs turned to Bill Gates at Microsoft and received a $150 million investment to keep the doors open in Cupertino, CA.

Microsoft's 2008 acquisition of Powerset allowed the company to quickly enhance Bing. The Mimvi agreement involves Microsoft making investments in Mimvi in the form of engineering services, software, and cash. While the exact terms of the deal haven't been disclosed, it is thought that Mimvi, a leading mobile app and data search provider, will develop tools for searching for mobile apps and data stored on the cloud utilizing Microsoft's Windows Azure platform. Microsoft recently announced that its Windows Azure Mobile Services platform would enable developers to add a cloud backend to their Windows 8 application, with support for mobile platforms including Windows Phone, iOS and Android in development.

Microsoft's strategic partnerships with both Facebook (NASDAQ:FB) and Yahoo (NASDAQ:YHOO) stand to benefit from this new relationship. Yahoo's CEO, Marissa Mayer, recently met with Microsoft CEO Steve Ballmer about improving Yahoo's search advertising partnership. Mimvi's core strength in mobile search and recommendation algorithms should strengthen Microsoft's technical capabilities in this area significantly and allow its partnership with Yahoo to deliver much improved results.

Likewise, Mimvi's strength in social search should enable Microsoft to greatly improve the integration between search and social that the relationship between Microsoft and Facebook is founded upon.

Looking forward, both Microsoft and Apple may be foreseeing a time when the aesthetics of mobile phones are inconsequential to the consumer. Therefore, it will come down to software and as Google showed for websites, whomever controls search wins the battle royale here. Enabling intuitive search across mobile platforms may be the secret weapon for Apple or Microsoft.

Conclusion

As a result of these aggressive partnerships in the mobile space, I would recommend Microsoft as a strong buy. I believe the company now recognizes how critical search is to its future and realizes that it must form strategic relationships to enhance its chances of succeeding here.

Apple's stock has been depressed the past two days, as shipments of the iPhone 5 have failed to meet some analysts' expectations. But any product which can affect the U.S. GDP has to be taken very seriously. In the battle royale between the two companies, the fight continues.

Disclosure: I have no positions in any stocks mentioned, but may initiate a long position in MIMV.OB over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.