Google search deal may be worth $20B annually to Apple, Bernstein says
Prykhodov
The search deal between Google (NASDAQ:GOOG) (NASDAQ:GOOGL) and Apple (NASDAQ:AAPL) - and others like it - is at the forefront of the Justice Department's case against the search giant, as the DOJ believes it has stifled competition.
And while the outcome of the case is likely to be in doubt for some time, investment firm Bernstein said any negative outcome could be a "downside catalyst" for the iPhone maker. 
"A negative ruling for Google would likely be a downside catalyst for Apple," analyst Toni Sacconaghi wrote in an investor note.
Sacconaghi, who has a market perform rating and $195 price target on Apple, said the deal, known as the Information Services Agreement, is likely worth between $18B and $20B annually and could account for anywhere between 14% and 16% of Apple's operating profits.
"While a ruling would likely be appealed, and could take years to be finalized, we think the economic impact on Apple is unlikely to be onerous," Sacconaghi added, explaining that Apple could eventually partner with another search engine or even make Google the default search engine outside the U.S. 
The analyst also posited that Apple could also give choice, implementing a choice screen for consumers. 
"We note that Apple controls access to its installed base, which generates ~$60B+ in advertising revenues, and accordingly, we believe that Apple would continue to command a commission (in the ~25- 30% range) for providing access to those search advertising revenues," Sacconaghi posited. "Moreover, introduction of a choice screen could offer Apple the opportunity to potentially launch its own search engine as an option."
Apple (AAPL) shares rose 0.8% in mid-day trading on Tuesday.

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