Later this year, upstart vendor BLU will release a smartphone that pre-installs a version of Cyanogen’s alternative Android build, but with a twist. The stack will eschew Google Apps in favor of third-party alternatives. Miami-based BLU, which is big in Latin America, sells unlocked Android phones in the U.S. at Wal-Mart and Best Buy.

The Forbes report revealing the BLU partnership goes on to quote unnamed sources stating that Cyanogen and Microsoft are “close to finalizing a wide-ranging partnership” to integrate Microsoft’s mobile services, including Bing, Skype, Outlook, OneDrive, and the voice-powered Cortana into future commercial Cyanogen OS installations.

The unlocked BLU phone due later this year will likely include Microsoft Bing, Cortana, and OneDrive, as well as the Opera browser, Nokia Here navigation, Dropbox, and Spotify, says the story. Another unnamed phone vendor tapping Cyanogen is said to be considering even more Microsoft apps. These may include the Android-optimized version of Office that Samsung, Dell, and other vendors will load on selected Android tablets as per this week’s announcement (see farther below).

The rumor of a Cyanogen partnership with Microsoft emerged in January in a Wall Street Journal report that Microsoft would be a minority investor in the fast growing software firm. The Forbes story reports that the rumored $80 million funding round has just been completed, but did not include Microsoft. An investment may well be part of the bundling deal expected later this year, however.

The $80 million funding round, which adds to a $30 million joint investment last year to spin off the commercial Cyanogen firm from the open source CyanogenMod project, is led by India-based PremjiInvest. It also includes investors like Twitter, Qualcomm, Telefónica, and Rupert Murdoch. The funding round values Cyanogen at close to $1 billion, says the story. Qualcomm is said to be prepping a reference phone that integrates Cyanogen with its Snapdragon processors.

Last year, Cyanogen released a commercial version of CyanogenMod called Cyanogen OS on the Chinese-made OnePlus One phone, as well as the Micromax Yu (Yureka), both of which were top sellers, according to Forbes. Alcatel recently announced it will bring a version of its 6-inch Hero 2+ Android phone to the U.S. loaded with Cyanogen OS. Other vendors looking to free themselves from Google’s shackles — or simply ship a better alternative to their existing Android clones — are likely to jump on, especially since Cyanogen is handling all the expensive software development for them.

BLU Ditches Google Apps

Like most mainstream Android phones sold in major markets, the first three Cyanogen OS phones ship with Google Play and other Google Apps. The BLU phone, however, would be the first Cyanogen-based phone to instead pre-install third-party apps. Other, primarily Chinese, Android vendors such as Xiaomi, have also avoided Google involvement with their forked versions of Android.

Consumers tend to prefer Android phones that pre-install Google Apps, which include Google Maps, Gmail, Google Drive, and Google Play. Open source and privacy advocates often opt for lesser-powered open source apps that promise not to track your every move, and others seek out some of the increasingly capable commercial options. However, the proprietary Google Apps continue to thrive, thanks in part to a widespread reputation for quality. You could argue that Android wouldn’t enjoy the mobile domination it does today without them.

That’s why many of CyanogenMod’s 50 million users purchase Google Apps, even if they’ve just flashed it from their Android phone in order to load CyanogenMod. The open source Android clone has gained its huge following, including some 9,000 open source developer volunteers, due to its up-to-date, open source, bloatware-free Android code. Also popular are its extensive customization opportunities, better battery life, and often faster performance. The project was launched in 2009 by hacker extraordinaire Steve Kondik, who continues on as Cyanogen’s CTO.

Mobile device vendors who pay big money to Google to pre-install the popular Google Apps have long chafed at the relationship. Google has reportedly used the apps as leverage to ensure greater control over Android or sell other Google services. Samsung’s backing of the Linux-based Tizen platform was seen as a response to Google’s app domination, although the company now appears to have slowed its push for Tizen on phones even as it continues to deploy it elsewhere.

Microsoft pushes Office onto Android tablets

Like Microsoft, software and services companies ranging from Spotify to Twitter also seek new opportunities to showcase their alternatives apps via mobile pre-installation deals. Yet, for Microsoft, Cyanogen is only one path for pushing its software on mobile devices beyond the roughly 3 percent of smartphones that run Windows Phone.

A month after Microsoft and Samsung settled a longstanding royalties lawsuit, the companies expanded a partnership this week that was announced at Mobile World Congress. In addition to pre-installing Microsoft OneNote, OneDrive, and Skype on Samsung’s new Galaxy 6 phones, Samsung says it will soon bundle those apps, along with Android-optimized Office apps (Microsoft Word, Excel, and PowerPoint), on selected Samsung Android tablets. Microsoft also announced it has signed similar deals with Dell, as well as 10 other lesser known hardware partners.

Office doesn’t go head to head with Google’s most important apps, as it competes mostly with the free Google Docs. The combination of OneDrive and Office, however, does go up against the Google Drive cloud storage product, which includes Google Docs, and is available in free and paid versions. A Cyanogen bundle that also included Bing and Cortana would hit even closer to home for Google.

Cyanogen CEO Kirt McMaster has been tapping into industry frustration with Google — and perhaps taking a page from the playbook of outspoken T-Mobile CEO John Legere — by calling Google tyrannical, and boasting to the Wall Street Journal that “We’re going to take Android away from Google.” Ramping up the trash talk, McMaster told Forbes “We’re putting a bullet through Google’s head.”

It’s unclear whether that bullet may someday ride in on a deal with Microsoft that goes beyond apps to include a version of Windows Phone based on Cyanogen OS. An acquisition also remains a possibility. Like Microsoft, most of Cyanogen’s employees are based in Seattle.

The ironies are thick here, considering that for many years Microsoft strong-armed PC vendors into pre-installing Office, or pressured them into loading Windows on netbooks instead of Linux. Now, after Google ruined its plans to establish Windows Phone as the rival mobile platform to Apple’s iOS, Microsoft is playing the underdog game while increasingly cozying up to open source projects, including the Raspberry Pi Foundation and perhaps Cyanogen.

CyanogenMod and Cyanogen OS already appear to have been deployed on more mobile devices than the leading mobile Linux contender, Mozilla’s Firefox OS, which is aiming at a lower end market. Cyanogen competes more directly with Tizen (Samsung) and Ubuntu Touch (Canonical), which have only recently begun shipping on phones.

The only mobile Linux project that has demonstrated any meaningful Android app compatibility is Jolla’s Sailfish OS, but it’s far from extensive and optimized compatibility of CyanogenMod. Some unnamed analysts told Forbes they expected Cyanogen could appear on as many as 1 billion handsets, or more than all the iPhones sold to date.