Apple's Profit Prospects At Risk If DOJ Rules Against Google In Search Lawsuit: Analyst

The ongoing lawsuit by the Department of Justice (DOJ) against Google, the unit of Alphabet Inc. GOOGL, could negatively impact Apple Inc. AAPL, despite them not being directly involved in the case.

According to a report by Barron’s on Monday, the lawsuit alleges Google of unfair competition in the internet search market, partly due to the large annual payments made by Google to Apple, ensuring it remains the default search engine on iPhones and Safari. The DOJ asserts these payments help Google maintain an undue advantage in the search market, a claim Google vehemently denies.

Bernstein analyst Toni Sacconaghi, in his latest research note, suggested the court might dissolve the relationship between the two tech giants. This potential outcome could adversely affect investor sentiment towards Apple, given that the company earns between $18 billion and $20 billion a year from Google, representing 14-16% of Apple’s overall operating profit.

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The resolution of the lawsuit, expected only by 2024 and likely to be appealed, could significantly impact Apple’s share prices in the long run. Sacconaghi, however, believes that the economic impact on Apple from terminating payments from Google would not be overly burdensome. He speculates that Apple could partner with another search engine, like Microsoft’s MSFT Bing, or even launch its own search engine.

“Apple could leverage its brand and its messaging around privacy to capture meaningful share,” Sacconaghi wrote, highlighting the potential for Apple to disrupt Google’s dominance in search queries.

The closing price for Apple’s stock on Monday was not immediately available.

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