What happened?
Apple's stock price (NASDAQ:AAPL), rose 3% to $153.12 Monday after an interesting analyst report.
What are you waiting for?
Toni Sacconaghi, Bernstein analyst, says Alphabet could pay Apple $15 billion this year in order to keep its position as default search option for iOS. This is an increase of the $10 billion that was expected in 2020.
Sacconaghi believes that the agreement with Google will increase Apple's services revenue growth of 8.5 percentage points. It could also account for up to 9% of Apple's gross profits for fiscal 2021.
What now?
It is easy to understand why Google would pay such high sums. Despite all its efforts to diversify, Google still makes the majority of its profits from advertising revenue. Google is still the most popular search engine in the United States and other parts of the globe, but it doesn't want to be outbid by rival Microsoft and regain market share.
Apple has a lot to gain and little to lose. Google is the most used search engine and the majority of its users will choose Google to search for their needs. Apple lets users choose from different search providers such as Microsoft's Bing if they prefer another option. Apple is reputed to have made billions of dollars in high-margin sales by simply doing what most customers would do.
Regulators could block these payments to limit Google's ability stifle innovation. Investors seem to have a more positive view of the future and are willing to bid Apple's shares up.
