Here's how Apple could benefit from Samsung's threat to ditch Google on its phones in favor of Microsoft's Bing

"The rise of Microsoft as a potential alternative to Google gives Apple more bargaining power to better monetize... over 2 billion Apple devices."

• Samsung's threat to replace Google Search with Bing across its devices could benefit Apple, according to Bank of America.
• The bank estimated Apple receives $20 billion for its search partnership with Alphabet, but that could increase with more competition.
• "The rise of Microsoft as a potential alternative to Google gives Apple more bargaining power to better monetize... over 2 billion Apple devices."

Samsung's reported threat to replace Google Search with Microsoft Bing across its devices could be a boon for Apple, according to Bank of America.

The bank said that Apple has an estimated $20 billion deal with Alphabet to make Google the default search provider across the hundreds of millions of iPhones and iPads it sells each year. But now Apple could have more leverage with Alphabet when it comes time to renegotiate that contract.

"The rise of Microsoft as a potential alternative to Google gives Apple more bargaining power to better monetize what is an extremely attractive installed base of over 2 billion Apple devices," Bank of America's Wasmi Mohan said in a Monday note.

Apple's current revenue-share agreement with Alphabet gives the iPhone maker an estimated 80% of the mobile traffic acquisition costs generated by the search queries of its massive user base, according to Mohan. The deal has long represented billions of dollars of high-margin revenue to Apple every single year.

"Apple has had a longstanding relationship with Google that has delivered an attractive low risk revenue and profit stream for Apple," Mohan said.

But as Microsoft grows Bing with the help of OpenAI's ChatGPT, Apple could re-negotiate with Alphabet for better terms or even consider switching to Bing when its current agreement expires.

"Renegotiation would involve getting a higher amount per search," Mohan said.

But it would also open Apple up to risks if the company was serious with the idea of switching to Bing for the default search option of its devices.

That's because if users decided to change the default search option on their iPhone back to Google from Bing, the volume of search queries that generates the high-margin revenue for Apple would decline, according to the note.

"A higher rate per search might not offset the share loss in aggregate search. Further, if Google can monetize the search at a much higher level, it could be hard for Microsoft to compete for the contract," Mohan said.

Mohan reiterated his "Neutral" rating on Apple and $168 price target, which represents potential upside of just 1% from current levels.