By According to Jefferies analysts, the US Department of Justice is “highly likely” to block Google’s long-standing search agreement with Apple. This move could potentially bring an end to the 22-year partnership that began in 2002 and remains active today.
The $25 billion deal, which sets Google as the default search engine on iPhones, is believed to contribute 20% of Apple’s pretax earnings and 6.3% of its overall revenue. Jefferies analysts suggest that blocking this agreement could lead to an 8% to 11% drop in Apple’s stock value.
Significance of the Apple-Google Partnership
- Core Issue in Antitrust Trial: At the heart of the largest antitrust trial in decades is Google’s practice of paying billions annually to secure prime placement on devices. The Department of Justice contends that these agreements suppress competition and hinder innovation, while Google argues that its dominance is driven by consumer choice.
- Potential Delay in Impact: Despite the possible disruption, the full consequences might not be felt immediately. Jefferies analysts suggest that the final court decision, including appeals, could take three to eight years. This delay could give Apple time to develop alternatives, such as launching its own search engine or enhancing AI capabilities.
- Broader Implications for Tech Industry: The case’s outcome could significantly affect the tech landscape. Apple may need to rethink its search strategy, potentially creating opportunities for rivals like Microsoft. Additionally, the ruling could reshape how Google maintains its market dominance through financial agreements.
