Google’s “Code Red”
That’s how Google has internally described yesterday’s Justice Department antitrust lawsuit against the company, which claims Google misused its power to eliminate competition on Apple’s products.
It has been public information that Google, and Apple have a partnership for Google to be the default search engine on iPhones. In 2018, the CEOs of both companies met to discuss how to drive search engine revenue growth. The public is just now learning more about how important this relationship is for both Apple and Google.
Google pays Apple a significant amount for the exclusive rights to be the iPhones default search engine. The deal is worth so much that the lawsuit projects it accounts for nearly 20% of Apple’s annual profit. The projections from the lawsuit would mean that the roughly $11 billion paid annually to Apple are about a third of Alphabet’s annual profits.
With the agreement being such an important part of both companies, expect a big challenge to come from the tech giants. Investors seem confident in the two companies despite the internal “code red” description because both companies closed on the day.
The results of this suit are a long way away, but it will be so important to monitor because of the precedent it could set. A defeat for Apple and Alphabet could be the catalyst for a Silicon Valley shakeup, while a victory will further solidify their power as two of the most valuable companies in the world.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.