Safe Investing In Apple’s Newest Friends

Karen is a member of The Motley Fool Blog Network -- entries represent the personal opinion of the blogger and are not formally edited.

The champagne corks were popping in Cupertino when Apple’s (NASDAQ: AAPL) stock broke the $700 barrier in after-hours trading.  Apple has now joined a very elite group of companies that have achieved this distinction, and it’s a short list that includes Google at $703 a share, NVR at $864 a share, and Central Steel & Wire at $725 a share. But Apple’s upward momentum shows little sign of slowing and analysts are already looking for the stock to reach $750 before the year ends.

In recognition of their prestigious status, Apple has made some new friends and business partners that should help Apple extend their global reach.  Forming strategic financial partnerships makes good sense for both parties, but for Apple, it’s also another opportunity to hit a home run against their sworn enemy, Google.

Google isn’t popular in Russian.  The search engine giant claims about 22% of the Russian market against Yandex (NASDAQ: YNDX), who reigns supreme at 60%.  It’s easy to see why Apple selected Yandex over Mail.ru and Google.ru to be the default search engine for Apple’s mapping service in their upcoming iOS 6, and as the default search engine for mobile Safari.  Along with being Russia’s largest search engine, Yandex has, as of 2Q 2012, over 193,000 paying advertisers.   This represents a 34% increase over 2Q 2011’s advertisers, and an 8% increase from first quarter 2012.  Search queries also increased nicely, up 30% from 2Q 2011. 

Apple products are very popular in Russia, but the country has been left out of the first two launch cycles.  As a result, the iPhone 5s available for sale on the web come with a $3,700, or 115,000 ruble, price tag.  Russia represents an incredibly untapped market hungry for Apple iPhones and iPads that pairing with Yandex will help open up.

It’s hard to tell what attracted Apple to Baidu (NASDAQ: BIDU) first:  the fact that Baidu holds 80% of the Chinese search engine market, or the company’s year after year dramatic jump in revenue.

Baidu

Revenue

Net Income

2011

2.304B

1.055B

2010

1.20B

534.951M

2009

651M

217.534M

The rumor’s been confirmed that Apple has inked or is just about ready to ink a partnership deal with Baidu, for while Apple has enjoyed considerably greater success in China than Google, Apple still hasn’t made the deep inroads into the Chinese market it had hoped to make.  There are only 5 Apple stores open in China, which is a grossly inadequate number as compared to the size of the country.  As an example of iPhone popularity, in January this year, the Beijing store had to remain closed for safety purposes due to the massive crowd waiting outside to buy an iPhone 4 at a cost of $790 to $1,070 each.

In January 2012, 356 million of the 500 million Chinese internet users accessed the internet through mobile devices.  That represents a 17.5% increase from a year earlier, and the number of worldwide mobile internet users is expected to continue enjoying year-over-year growth.  Baidu is itching to grow and has paired with Apple to be the tech giants default iOS search engine.  Apple’s hoping that Chinese loyalty to Baidu will rub off on them and convince new users to go with iPhones. If the agreement goes through, both companies will share any revenue earned through iOS advertising sales, and Apple will also add Chinese language support for Siri.

There’s no future for Google in the Apple universe and the tech giant continues to seek new ways of undermining its opponent.  Partnering with Yandex and Baidu gives Apple the inside track to increasing smart device sales to markets hungry for iPhones and iPads. 


kprogers has no positions in the stocks mentioned above. The Motley Fool owns shares of Apple and Baidu. Motley Fool newsletter services recommend Apple and Baidu. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.If you have questions about this post or the Fool’s blog network, click here for information.

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