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Apple's Alliance With Yahoo Makes Sense, but Don't Expect Breakup With Google

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Apple would have learned its lesson from the Maps debacle, says one tech analyst.

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Last week, the Wall Street Journal broke the news that Apple (NASDAQ:AAPL) and Yahoo (NASDAQ:YHOO) were in talks to deepen their mobile-services relationship,

The partnership is mutually beneficial because it allows Yahoo to improve its presence in mobile, and it allows Apple to distance itself from rival Google (NASDAQ:GOOG), said Sterne Agee analyst Shaw Wu in a report. Additionally, Yahoo data already powers native iOS stock and weather apps on iPhones and iPads.

Wu wrote:

The Yahoo-powered iOS native weather app, as seen on this reporter's phone.
While this is a positive for Yahoo as it looks to strengthen its presence in mobile, this also signals Apple's efforts in lessening its dependence on Google, who has arguably emerged as its biggest competitor.

Yahoo has somewhat become the "Switzerland" of Internet companies and an ideal partner for Apple as it isn't in the mobile-devices business and doesn't own a mobile device OS, popular Web browser, or social network.

But while an Apple-Yahoo alliance makes sense, provided Yahoo will be able to deliver quality content for Apple, the Cupertino, California-based company will not be severing its ties with Google anytime soon, Dr. Richard Windsor, founder of the mobile-focused blog Radio Free Mobile and a former tech analyst at Nomura, tells Minyanville.

Windsor acknowledges that Google will be hurt if Yahoo and Apple advance their relationship in the short run.

"I would estimate around 50% of Google's mobile advertising revenue is coming from iOS. Also, at the moment, iOS customers are the most valuable ones because they have the most disposable income. So if Apple was to boot Google, short term, Google would take a big hit," opines Windsor.

However, he says that Apple will not be dropping Google Search anytime soon, given the popularity of the product, which is a relief for Google since search accounts for an outsized portion of its revenue.

"An extreme case might be that Apple will include Yahoo's search engine as the default, but then you can always download Google search from the app store," he shares, highlighting that Apple would have learned its lesson from dropping Google Maps and introducing its own native mapping app.

Apple will be cautious, because it will worry that "if it doesn't make available Google Search anymore on its devices, maybe some users will go: "To hell with this, I'm not using iOS anymore. And they go buy a Samsung (PINK:SSNLF) Galaxy S4. It's a very, very dangerous game," he adds.

"I think what they will do is they will say: 'We think Yahoo Search is the best, and we're going to optimize it to be absolutely fantastic on iOS devices, but if you really want Google, you can have it.'"

Also see:

Apple Might Be the Bigger Loser in the Apple-Samsung Breakup

Apple's Problem With iPhone Numbers

The PC Market May Be Dying, but Apple Is Still Minting Money in It


Twitter: @sterlingwong
No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

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