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Apple (AAPL) Seeks Tough Data Protection in Google Lawsuit

Zacks Equity Research
·4-min read

Apple AAPL recently asked a federal judge overseeing the Alphabet-owned GOOGL Google antitrust case to hide sensitive information from Google, per a Reuters report. Access to Apple's data could put the iPhone maker at a disadvantage when forging future deals with Google.

The iPhone-maker and a number of major companies including Microsoft MSFT, Amazon AMZN, AT&T, Comcast, Duck Duck Go, Oracle, Sonos and T-Mobile among others have asked judge Amit Mehta of the United States District Court for the District of Columbia to designate certain data used in the Justice Department case as highly confidential.

Notably, on Oct 20, the Justice Department issued its antitrust lawsuit against the search giant, suggesting that the company is unlawfully maintaining monopolies in the markets for general search services, search advertising, and general search text advertising in the United States.

Alphabet holds a commanding lead in both search and video. The company dominates the search market — with roughly 90% of the world’s Internet searches conducted on its platform — and roughly three quarters of American adults turn to YouTube for video, as The Wall Street Journal reported.

Apple has already disclosed terms of its relationship with Google and expects to be asked for additional information. The company has urged that only Google's outside counsel be allowed to see any highly confidential data and not any in-house lawyers.

Apple Inc. Price and Consensus

Apple Inc. Price and Consensus
Apple Inc. Price and Consensus

Apple Inc. price-consensus-chart | Apple Inc. Quote

Apple’s Earnings in Jeopardy

Meanwhile, Apple’s shares have returned 55.1% year to date compared with the Zacks Computer - Mini computers industry’s growth of 54.2%.

Apple, which does not have its own search engine, struck a multiyear deal making Google the default search engine on all iPhones and other Apple products. The company’s web browser Safari, voice assistant Siri and device query feature, Spotlight all made Google the default choice.

However, the lawsuit could prove more damaging for Apple in the immediate term if the agreement between the two companies is compromised.

Markedly, Google pays Apple an estimated $8 billion to $12 billion a year, which makes up about 15% to 20% of Apple's global net income to be the default search engine on iOS devices by using its profits to maintain an edge over its rivals.

The filing cites that Google estimates that 50% of its search traffic comes from Apple devices and the ad dollars that result from the relationship likely account for an even higher percentage of Alphabet’s revenues.

Any limitation on Apple's strategic relationship with Google or the potential loss of Google revenues will have a negative impact both in the immediate and longer term. However, the Zacks Rank #3 (Hold) company is speculated to build its own search engine and sell search ads to make up for the loss in the future. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Moreover, Apple’s services revenues (22.5% of total sales) have risen steadily and were up 16.3% in the last reported quarter to $14.55 billion, playing a big part in the company’s top-line growth. But the Justice Department lawsuit reveals that nearly a quarter of that comes from Google, threatening the growth of the company’s new cash-cow besides increasing scrutiny and legal woes over App Store.

Meanwhile, Apple’s App Store has been facing backlash from third-party developers over the past year for forcing them to pay a 30% cut and only use the company's own in-app purchasing system.

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