Business Week is reporting tonight that Apple and Microsoft are in talks to replace Google as the default search engine on the iPhone with Bing, as Apple and Google become increasingly more competitive: 

A deal between Apple and Microsoft may mean iPhone owners would automatically get Microsoft's Bing as the main search engine, possibly requiring users to actively change phone settings if they want to search via Google. Google is now the default search engine on the iPhone. To search via Bing, a user needs to download a Bing application or go through the browser to call up www.bing.com. Microsoft may also be lobbying to make Bing an alternative on Apple's Safari browser for Mac users. Currently, Mac users can choose either Google or Yahoo search through the Safari browser.

Both Microsoft and Apple spokespersons declined to comment on the story to Business Week (hey Frank Shaw, tweet us a hint!), but according to one of the un-named sources of the story, Apple may be planning on using Microsoft to fight back at Google, who recently came out with a smartphone, and iPhone competitor, of their own:

"Apple and Google know the other is their primary enemy," says one of the people, who's familiar with Apple's thinking. "Microsoft is now a pawn in that battle." Apple is also working on ways to manage ad placement on its mobile devices, a move that would encroach on Google's ad-serving business, the person says.

The article goes on to say that Apple may see the move as short-lived, as they may have an upcoming skunk-works search project of their own.  Good luck with that, if Microsoft and Bing are any indications of how hard it is to break into the search market. In addition, a deal with Verizon to replace Google with Bing on Blackberrys hasn’t gone over so well, and the iPhone crowd might be quite vocal in their opinions on having Google taken from them.  Still, the move would be quite a coup for Bing, a bit of a black eye for Google, and would get the Apple fanboys all riled up… sounds almost too good to be true!