Microsoft and Verizon might be conspiring  to build an iPhone challenger. The two companies make an inauspicious team: sales of Microsoft's Zune media player, the likely basis for the new device, have been in freefall  for months. Verizon's last big bet, the Blackberry Storm, wasn't that great . But together, the two companies might be able to achieve some kind of alchemy that has proven irretrievable alone.
Of course, that's only if the two companies are planning the kind of device that I suspect they are: a true lifestyle phone. If the pair has any sense, they won't try to build a smartphone for business--the current crop of Windows Mobile phones already has that beat covered. No, this will be a consumer-oriented, youth-styled device that is big on media, networking and fun, and it won't be a half-breed like the Storm.
The evidence for a fun-phone is building: The Wall Street Journal reports that the device will be touchscreen, and is borne out of a partnership the two companies built in January for (consumer-oriented) Web search. Not only that, the group of Microsoft designers in charge of developing the device is the recently-acquired Danger, Inc. team that put together T-Mobile's kid-popular Sidekick operating system. Oh, and did I mention the project's codename is Pink ?
Microsoft and Verizon will have their work cut out for them. Redmond, for one, is losing smartphone marketshare by the week in the U.S., and it's because Windows Mobile devices just can't stack up to the Blackberry, the iPhone, and the Android OS when it comes to media, Web, games, interface, and, well, just about everything else. Microsoft CEO Steve Ballmer has admitted  as much. (Below, a mockup of the rumored "Zune HD" device that could lend design elements to a Microsoft phone.)
Verizon has its own obstacles. Though lauded for its excellent coverage, it has been notorious for locking down features on its phones and aggressively limiting the ways they function, as compared to more free-spirited carriers like T-Mobile. Its plans are also pricier than most, if not all, of competing smartphone carriers. On paper, the company is antithetical to the spirit of a capable Zune-phone.
Both companies may, however, be willing to change their ways. Microsoft, for one, has an excellent product in the Zune, and an even better music store with the Zune Pass program--if Microsoft made Zune software for the Mac, I'd probably ditch my iPod and get one. Ditto for the Zune's social-sharing program and interface, which are also excellent. Point is: Redmond can think hip when they try. With the Danger, Inc. folks on their side, there's no reason they can't translate that spirit into a mobile phone OS without carrying over any of the stodginess that makes Windows Mobile such an anachronism.
The same goes for Verizon. The company is so desperate  for iPhone-level success that their CEO went public with unlikely speculation that maybe, oh-please-maybe, Apple might consider a deal with them instead of renewing their contract with AT&T in 2010. (If Apple does decide to develop an LTE-compatible device--which seems likely, since both Verizon and AT&T will use that same 4G technology--it won't see market for years, and it will probably remain on Ma Bell's service.) In the mean time, Verizon knows it needs a hit.
Slap together Verizon's network and the Zune's usability, and you have the ingredients for a great phone. Add Microsoft's new commitment to under-selling  Apple, and you have an inexpensive phone. It doesn't really matter that Microsoft spokespeople categorically denied  the rumors about a "Pink" phone this morning; if they've really learned anything from watching Apple's success with the iPhone, it's that secrecy and coyness go a long way towards building buzz and surprising the competition.