|Could Russia's iPhone Sales Potential Fuel Yandex Shares? |
It appears Apple ( AAPL) is in talks with Baidu ( BIDU) to add Baidu as a possible search engine on the next version of iOS. This a wise move for both firms for a number of reasons. The first reason is that it will give Chinese users a more familiar search engine, which will give Chinese consumers an added reason to purchase the iPhone. Keep in mind that Baidu will not be the default search engine, but it would give consumers an option.
This is also important for Baidu. If Baidu is added as a possible search engine to the iPhone, then Baidu will gain substantial market share in China because Chinese consumers will be able to search with Baidu at home and on their iPhones. This will in turn cause Google ( GOOG) some concern. Baidu's Chinese market share is 78%, courtesy of Google deciding to stop censoring search results in China back in March 2010. An iPhone option will cause Baidu's revenue and income to increase moving forward. Thus, Baidu is another company that is positively affected by Apple.
Yandex ( YNDX) may be next in line on the Apple profit train. With Apple possibly granting access to Baidu, Apple may add a Yandex option in the future. There a few problems with this idea, though. One is that iPhone sales in Russia are one notch above terrible. Another reason is that Yandex has already created an app.
But let me see if these problems can be fixed, beginning with the lagging iPhone sales in Russia. The IDC is forecasting that iOS smartphones will increase about 1% this year. This is a negligible improvement, but it is improvement. The biggest problem stemming from a lack of iPhone sales in Russia is that Apple may not invest any time in creating a Yandex search option if end user demand does not warrant the investment.
On the other hand, if Apple gives Russian consumers the option to use Yandex as a programmed search engine, we may see iPhone sales increase substantially in Russia. It may sound like a long shot, but it is a possibility.
Since Yandex developed an app, it may seem like there is no need for Apple to create a Yandex option. However, while most consumers may be happy with a simple app, the truth is that convenience is one of the keys to satisfying customers. It would be much more convenient for Russian consumers to have Yandex set as the default search engine and completely bypass clicking on an extra app to surf the web.
Even though Apple has a history of neglecting customer satisfaction, excluding the fact that Apple's products are inherently satisfying, Tim Cook is a different man than Steve Jobs. While Steve Jobs wanted to create the largest and most successful business in the world, Tim Cook seems to care more about customers, employees, and supporters of Apple Incorporated. This is a positive sign because it indicates that Cook may be willing to develop a Yandex search engine.
Assuming Apple develops a Yandex search option, the share price will increase at a much quicker rate. Yandex has about 60% market share in Russia, and having an iPhone search option will greatly improve this market share. Yandex has been losing market share to Google, courtesy of Android.
Investors have seen that any stock related to Apple could be a great investment. Baidu was the most recent candidate of this, on Monday, and Yandex may be next in line. Investors should not expect anything to happen in the near term, but if Russian iPhone sales begin to move higher, the probability of Apple developing a Yandex search option will substantially increase. If that happens, investors will see Yandex's share price move substantially higher.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.