By Dan Gallagher
Apple may be worth one and a half Googles now, but the world's most valuable company needs its relationship with the world's largest search engine to keep clicking.
Such was evident Monday when Apple filed papers seeking to participate in the penalty phase of the Justice Department's antitrust case against Google. The search giant lost that case in August and is now battling the government over what remedies are appropriate. The DOJ has a long wish list that includes breaking the company up, forcing Google to make key search and user data available to potential rivals, and stopping the payments Google makes to partners such as Apple.
The payments to Apple alone now reportedly equate to about $20 billion annually, and make Google the default search engine on devices like the iPhone. Apple didn't confirm any specific amounts in its filing, but did say the company feels compelled to "protect its commercial interests." Analysts widely estimate that the payments from Google are nearly pure profit for Apple, given relatively little incremental cost to generate that revenue. For Apple, $20 billion is about 16% of the operating income reported for the company's fiscal year that ended in September.
Apple's argument, though, goes beyond its own bottom line. The company noted that excluding Google as a search option on its devices would harm consumers who "overwhelmingly prefer Google's product." But including Google without Google paying for the privilege would create "a perverse result in the market" by providing a windfall to the search market's dominant player.
Apple, whose market capitalization of nearly $3.9 trillion dwarfs the $2.4 trillion that Google-parent Alphabet currently carries, also made clear that getting into Google's business itself would be a heavy lift. "Apple has committed to other growth areas and has no desire to incur significant costs in an area of substantial risk," its filing read. "Apple cannot be expected to invest in general search now, as AI advancements may obviate any efforts before a viable [general search engine] could even be developed."
Even the iPhone maker cannot afford to spread itself too thin.
This analysis comes from the Journal's Heard on the Street team. Subscribe to their free daily afternoon newsletter here.
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(END) Dow Jones Newswires
December 24, 2024 13:31 ET (18:31 GMT)
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