Microsoft Corp. and Verizon Wireless are in talks to launch a touch-screen multimedia cell phone on the carrier's network early next year, in an ambitious effort to challenge Apple Inc.'s iPhone, according to people familiar with the matter.

The discussions are a gambit by Microsoft Chief Executive Steve Ballmer to energize a mobile business that has lost buzz among consumers and software developers to Apple's iPhone and Google Inc.'s Android.

Microsoft is a major player in software for cell phones, but it is working hard to develop a new device that will rival Apple's.

[A Microsoft spokesman denied that his company was working on a smartphone in an e-mail to a cell-phone blog Tuesday.]

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