The Seattle Times is reporting that Steve Ballmer, who notoriously laughed at the iPhone, had some good things to say about it last week in a speech he gave at the computer-science building at the University of Washington. "Apple's done a very nice job that allows people to monetize and commercialize their intellectual property," he said.
Ordinarily, a comment like this might not be significant, but in this case it adds fuel to the fire that Apple will replace Google with Bing as the default search engine in the next iPhone OS. Google and Apple are increasingly at odds and it's possible that Apple may see an alliance with Microsoft as a way to stave off Google's mobile growth.
For Microsoft, a deal that puts Bing on the iPhone would be a huge win as mobile search is becoming increasingly common. Smart phones are becoming more mainstream and the iPhone is increasingly dominating the handset market.
Currently Microsoft offers a Bing iPhone app. Whether Bing goes further on the iPhone remains to be seen because Ballmer, rather uncharacteristically, is staying mum. The Seattle Times cornered Ballmer after his speech and asked is there an "enemy of my enemy is my friend" thing going on, to which Ballmer just smiled, said he couldn't answer and climbed into his car.