Google Is Paying A High Price to Apple Every Year

The U.S. Justice Department sues Google for its anticompetitive tactics to preserve a monopoly for its search engine. But the suit will probably bring a heavy blow to another technology giant, Apple, as the profit of the deal between the two companies accounts for one fifth of Apple’s total profit.

The Justice Department filed an antitrust lawsuit against Google last week, and the key of the case is the deal between the two companies that is worth billions of dollars. And through the deal, Google Search became the default iOS search engine. This deal plays an important role in Apple’s service business, as service business contributed the most to Apple’s growth in the past few years. 

Prosecutors claim that the deal is representative of illegal tactics used to protect Google’s monopoly and stifle competition, while Google denied. For Apple, it’s a deal of great business value, as it involves more than a billion users and devices all over the world. According to the analysts and investors, although the accusation is not clear yet, losing the partnership will be a great damage to Apple, since one fifth of Apple’s profit comes from the deal.

Toni Saccoaghi, analyst of Bernstein said, “If you analyze carefully, you will find that Apple is suffering from a greater financial risk than Google.” He estimated that Apple’s stock price will drop by up to 20% if the deal is completely cancelled. On the other hand, some people believe that Apple could minimize its loss by offsetting the loss with other deals concerning Google and Google’s competitors.

Last week, when the Justice Department accused Google of monopoly, investors show no worries, and the stock price of Apple was still rising.

According to Mark Stoeckle, CEO of Adams Funds, who lists Apple as their main investment target, judgement of the case will probably last for a long time. And he doubted that Google’s tactics show no difference with some companies’ behavior of paying the supermarkets for putting their products in an eye-catching place. As he mentioned in his email, cancelling the deal will have some damage to Apple for sure, while he regarded it as a controllable risk.