Apple's $20-Billion Problem -- December 27, 2024

Breitbart headline: Apple desperate to defend mega-payout from Google in antitrust case (https://www.breitbart.com/tech/2024/12/27/apple-is-desperate-to-defend-mega-payout-from-google-in-antitrust-case/).

"Everyone" has known about this issue for decades. 

My hunch: Apple has planned for that contingency, a ruling against the arrangement.

Apple's annual revenue: $400 billion.

Apple's annual income: $100 billion.

The $20 billion (or whatever it is now) comes in as "revenue."

$20 / $400 = 5%.

Unfortunately, one assumes there is very little cost to this "revenue," thus suggesting the revenue drops to the bottom line as income.

$20 / $100 = 20%. Ouch.

So, yes, this is a big deal.

My understanding is that this is an issue of a "monopoly." Apple has an exclusive agreement with Google.

Such cases do not play out well in the EU and are likely not to play out well in the US.

If that is the case, that Apple needs to "open" its search capabilities to other search engines, my hunch is that, though cumbersome, Apple will slice and dice that opportunity, charging each search engine provide a fee for allowing Apple users to use a particular search engine. 

One reason Google likes this arrangement, Apple and Google set a price to which they both agree. But neither really knows what the free market might bring. My hunch: in total -- more than the $20 billion Apple currently gets. Some search engines would not be able to compete, and others that want to get in on this lucrative arrangement may be willing to pay more than what Google has been paying.

Even better, Apple is going to cash in on ChatBots / AI. "Search" as we currently know it goes away. I'm now using AI on a regular basis which is much better than search for answering specific questions. 

But Apple has bigger issues.

Here are the revenue and income charts for Apple.

It's pretty obvious Apple has a bigger problem than losing the $20 billion mega-payment from Google.

But this is the real problem with regard to the $20-billion payout.

A reader calculates that this payout works out to $ 1.32 per share at today's numbers, if accurate:

• 1.32 / 260 = 0.005 or 0.5%. 

Chickenfeed.

This problem is the headline. 

"Apple Loses Mega-Lawsuit; To Cost Apple $20 Billion Annually."

That will spook investors and the share price won't drop $1.32 / share. The headline will drive the Apple share price down $13.20 / share. 

A buying opportunity, if I ever saw one.