First off, thanks to Alex Bogusky for letting me piggyback the title of this post.

Last month my colleague Laura Carrillo asked if it will be Apple or Google to own the third screen. Recent events have provided an opportunity for a third contender in the quest for the third screen: Microsoft.

Tentative talks have been underway for weeks now between rivals Microsoft and Apple to replace Google with Bing as the default search engine on all iPhones.  The last time something like this happened it was Microsoft allowing iTunes on the Windows platform in 2003.

“If you have to do deal with the devil,” says Forrester Research analyst James McQuivey, “you might as well deal with the one that needs you the most.”

From Apple’s ban of Google’s apps on its store to the departure of Eric Schmidt from Apple’s Board of Directors last August, it has been increasingly apparent that over the past couple of years that tensions in the relationship between Apple and Google have been emerging.  Finally on January 5, 2010, Google unveiled its phone, the Nexus One, and officially entered the mobile hardware market. On that very same day, Apple acquired Quattro Wireless (Apple’s second choice after Google outbid them to acquire AdMob in fall of 2009), and entered Google’s sphere of advertising. It’s now officially war.

All of this time, Microsoft has assumed the archetype of the forgotten middle child; exactly where it wants to be. With dwindling market share of its mobile OS, why would anyone expect the company to announce its entry into the mobile device market? Microsoft has also repeatedly denied any intention of entering this market, much like Apple did before it released the iPhone.

Back in 2006, Microsoft launched the Zune as an alternate and competing product to the iPod, albeit five years later. It has never come even close to touching Apple’s share in the portable media player market. In 2009, Microsoft only had an estimated 2% as compared to Apple’s 70%. With a five-year competitive advantage and Microsoft’s lack of experience in hardware, this came as no surprise to many. Windows Mobile OS also trails in market share behind Nokia, Apple, and RIM. Q3 2009 reports tell it only has roughly 8% of the global share.

Could Microsoft gain ground in these areas with a phone?

Back in 2008, Microsoft purchased Danger, the producers of the Sidekick for $500 million and subsequently formed the Microsoft Premium Mobile eXperiences (PMX) group. Mary Jo Foley also writes of the Pink Project, the codename for both the set of premium mobile services and one or more Windows Mobile phones aimed at the teen/twenty-something market.

In Q3 of last year, Microsoft launched the Zune marketplace (U.S. and Puerto Rico only) and announced in December the decision to form a new organization within the Server & Tools Business that combines the Windows Server & Solutions group and the Windows Azure group, into a single organization called the Server & Cloud Division (SCD).

Over at Engadget back in April of last year, Nilay Patel rumored that Microsoft was getting ready to launch Zune software on telephone handsets and those rumblings are still going on today.

Robbie Bach, President of Entertainment and Devices at MS, has even gone on record saying, “There are other places where Zune logically could go that we don’t get to talk about yet.” Interview transcript here.

It sounds like Microsoft has been steadily working on putting all of the pieces together.

The Microsoft user experience has come a long way. On the software side, Windows 7 OS has been touted as being even better than Snow Leopard; a far cry from Vista, which was only release worldwide three years ago. I will also personally attest to the quality of MS Surface, its tablet device, since I had the pleasure of testing it out myself at IDS10 this past weekend. Microsoft has definitely stepped up its game in the field of interaction design.

With Windows Mobile 7, Microsoft could still be a serious contender in the battle for the platform and ultimate user experience. It has almost every piece of the puzzle: an operating system, mobile hardware (potentially) to load it onto, a search engine (with an opportunity to cut Google off of an information source and subsequent revenue stream), and the marketplace to integrate everything together (even with Xbox Live).

Could it be a step towards a seamless and integrated complete user experience? Here’s hoping we’ll find out more about WinMo7 at the Mobile World Congress in Spain, beginning on February 15^th.

IMHO, I will make one recommendation to the folks at Microsoft. For Microsoft to acquire anything beyond a specialty niche in the mobile computing device market, it is going to require a concerted effort. With an ecosystem of 100,000 applications, and with over two-and-a-half years with a product already on the market, Apple has a big lead. There is a lot of ground to cover in the smartphone market. The Zune trailed the iPod by five years. Don’t let another five go by.