Verizon Wireless could give Microsoft Corp. (MSFT) and the software giant's Windows Mobile platform a badly needed shot in the arm.

According to The Wall Street Journal, the two are in talks to launch a smartphone codenamed "Pink." Verizon Wireless gets yet another potential signature phone to stem defections to the iPhone. More importantly, Microsoft gains a high-profile ally in pushing its operating system, which many deem dependable but unexciting.

Microsoft, in a prepared statement, said the strategy for its mobile operating system, hadn't changed and that it remained interested in working with a variety of operators and handset makers.

But a person familiar with the matter said Microsoft would likely explore prototypes based on technology it acquired when it bought Danger Inc., a mobile software and services company, in 2008.

Danger designs the Sidekick, a smartphone device sold in the U.S. by T-Mobile Inc. a unit of Deutsche Telekom (DT), which is similar to Research in Motion Ltd.'s (RIMM) BlackBerry. The person said Danger's work on the "social" aspects of smartphones would likely play an important role in any prototypes Microsoft develops. The "Pink" phone could also incorporate aspects of Zune, Microsoft's music device.

Windows Mobile is feeling the heat. Many of its major partners are shifting their focus towards rival Google Inc.'s (GOOG) free Android platform, while Apple Inc.'s (AAPL) iPhone and the BlackBerry continue to take market share.

Verizon Wireless - which has a base of 86.2 million wireless customers, thanks to its acquisition of Alltel - brings the heft and credibility needed to restore Microsoft's profile in the industry.

To be sure, Microsoft hasn't been asleep at the wheel. It sold 20 million Windows Mobile devices last year.

But more recently, things have turned away from Microsoft. Struggling Motorola Inc. (MOT) had all but shut off any resources to developing Windows Mobile phones, instead focusing on Android. Samsung Electronics Co. (005930.SE) unveiled its first Android phone. Palm Inc.'s (PALM) Pre and Web OS platform have siphoned off any buzz that hadn't gone to the iPhone.

Having a signature Verizon Wireless cellphone using Microsoft software could provide upside if it taps into the carrier's large base. If Microsoft puts more work into the operating system, and the signature device sells well, it could be used as a standard bearer to call back disenfranchised partners.

Microsoft is already showing some progress. At the last wireless industry conference earlier this month, unit head Robbie Bach showed off a new version of its mobile browser, which looked impressive.

Still, challenges remain. The iPhone remains a dominant force. Verizon Wireless has positioned several devices, most recently the BlackBerry Storm, as iPhone killers, but none of the devices has been as successful. There's no guarantee a souped-up Microsoft-powered device will dent that momentum.

Spokesmen for Apple, Verizon Wireless and AT&T declined to comment.

-By Roger Cheng and Jessica Hodgson, Dow Jones Newswires; 201-938-2020; roger.cheng@dowjones.com