Apple Inc (NASDAQ: AAPL) is ramping up efforts to develop its own search technology amid a backdrop of antitrust scrutiny over its relationship with Google parent Alphabet Inc (NASDAQ: GOOGL) (NASDAQ: GOOG), the Financial Times reported Wednesday.
What Happened: The development would cast a shadow on the multibillion-dollar payments that the search engine giant makes to the Tim Cook-led company, according to FT.
Apple has reportedly begun to include its own search results and directly link to websites in the latest version of its iPhone operating system.
Apple frequently posting job opportunities for search engineers also point towards Apple’s ambitions in the field, FT noted.
There is a heightened sense of urgency surrounding search after the United States Department of Justice launched a case last week over payments Google makes to Apple for its place as the default search engine on the iPhone.
Digital market consultant Suganthan Mohanadasan told FT that Cupertino’s web crawler — Applebot — has shown up “a ridiculous number of times on his clients’ websites. “When the crawl rate increases, that tells us they are trying to gather more information,” said Mohanadasan.
Why It Matters: The move on search presents an alternative for the Cupertino, California-based company should it be forced to decouple from Google.
The Department of Justice estimated Google’s annual payments at $8 billion to $12 billion for the privilege of being the default search service on the iPhone — making up for 15-20% of Apple’s profits, according to the Wall Street Journal.
The DOJ complaint accuses the Sundar Pichai-led company of locking out competitors via exclusionary agreements.
Building a new Google rival for Apple could take years, but the latter has cash reserves to the tune of $81 billion that gives it the wherewithal to build one over the long-term, noted FT.
Price Action: Apple shares closed 1.35% higher at $116.60 on Tuesday and fell 0.41% in the after-hours session.
The same day, Alphabet Class A and Class C shares both closed about 0.9% higher at $1,598.88 and $1,604.26, respectively.