Apple's entry into new markets could maintain its stock momentum (Part 4 of 5)
Apple makes Bing the default search engine for its Spotlight search feature
During the recent WWDC event, Apple (AAPL) announced that Microsoft (MSFT) Bing will be the default search engine in the redesigned Spotlight search feature for the upcoming versions iOS 8 and OS X Yosemite, potentially replacing Google (GOOG) as the default search engine. Last year, Apple also made Bing the default search engine for its Siri application. Here, we’ll analyze why Apple would take this step.
Traditionally, Apple and Microsoft have been competitors
Historically, Apple and Microsoft have been competitors—primarily in the PC operating system market. Microsoft had managed to win this battle in terms of its share of the PC operating system market, but when it comes to profitability, Apple has always won. Apple believes in selling quality products at premium prices, which is why it doesn’t concentrate on winning market share, but rather on profitability. However, the PC market is undergoing a structural decline that’s currently led by Lenovo (LNVGY) and HP (HPQ). As the chart above shows, the smartphone market has become about four times bigger than the PC market. This ratio will continue to increase, as smartphone sales are expected to grow at a healthy rate while the PC market continues to decline.
Why would Apple replace Bing with Google?
While Microsoft is the dominant player in the PC operating system market, Google is the dominant player in the smartphone operating system market. This shows that the main competitor for Apple isn’t Microsoft, but Google. Plus, the relations between Apple and Microsoft have improved lately. A few months ago, Microsoft launched its Office application for iPad, which the company was reluctant to do in the past. This possibly explains the reason Apple chose Bing over Google as the default search engine for its operating system.
Browse this series on Market Realist:
- Part 1 - Apple’s entry into new markets could maintain its stock momentum
- Part 2 - Why connectivity between Apple devices would help lock in users
- Part 3 - Why Tim Cook emphasized Android’s fragmentation at the WWDC event
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