Wall Street analysts suggested that a possible solution for Google to prevent antitrust lawsuits could be to end the deal that makes its search engine the default on Apple devices.
According to analysts at Morgan Stanley, Google pays Apple approximately $20 billion per year, which amounts to around 36% of its earnings from search advertising produced through the Safari browser.
According to analysts, if the acquisition is cancelled, the iPhone manufacturer might experience a decrease in earnings ranging from 4% to 6%.
According to media reports in May that referenced a document submitted by the Department of Justice in the antitrust case, the agreement is in effect until at least September 2026, and Apple has the authority to independently prolong it for an additional two years.
“The judge is expected to rule that Google should cease paying for default placement or that companies such as Apple should actively encourage users to choose their search engine instead of setting a default option and allowing consumers to modify settings if desired,” stated Evercore ISI analysts.
Apple’s stock remained stable on Tuesday, failing to match the overall market’s rebound following Monday’s worldwide sell-off. The Alphabet stock saw a slight modification, decreasing by 4.5% in the preceding trading session.
“The main point here is that if you have a strong position in the market with a product, it is advisable to refrain from using exclusive agreements and ensure that any agreement you make allows the buyer to freely choose to substitute the product,” stated Herbert Hovenkamp, a law professor at the University of Pennsylvania.
Indeed, the “remedy” stage may be protracted, subsequently leading to possible appeals to the U.S. Court of Appeals, the District of Columbia Circuit, and the U.S. Supreme Court. The legal dispute might last until 2026.
Artificial Intelligence Malfunction
If the partnership is canceled, Apple will have other possibilities, such as providing users with options like Microsoft Bing or potentially introducing a new search product utilizing OpenAI’s technology.
Experts concur that the decision will accelerate Apple’s transition to AI-driven search services. It has lately declared its intention to integrate OpenAI’s ChatGPT chatbot into its products.
Apple has announced that it is engaging in discussions with Google to incorporate the Gemini chatbot, along with other artificial intelligence models, as part of its strategy to move away from exclusive agreements that could attract regulatory scrutiny.
Apple is enhancing Siri with artificial intelligence (AI) technology, empowering it with greater capabilities to manage challenging tasks like composing emails and engaging with messages.
Although it is anticipated that these endeavors will generate minimal revenue in the near future, they have the potential to make use of the emerging technologies.
“Apple may perceive this as a transient obstacle, particularly considering its substantial earnings from the Google search agreement. However, it also presents an opportunity for the company to shift its focus towards artificial intelligence solutions for search,” stated Gadjo Sevilla, an analyst at Emarketer.
