Morgan Stanley: Microsoft poses ‘immaterial risk’ to Apple’s App Store

The chief of Microsoft’s Xbox division this week said that the company plans to introduce its own app store for mobile games on iPhones and Android devices as early as next year – contingent on the EU’s Digital Markets Act (DMA) which is sure to be appealed by Apple, Google, and others – provided that Microsoft’s $75 billion acquisition of Activision Blizzard is approved by regulators. Analysts at Morgan Stanley said Tuesday that if Microsoft is able to launch its own app store, it would be an “immaterial risk” to Apple.

Ashley Capoot for CNBC:

“If we took a ‘worst case’ view of the world and said the potential Microsoft app store could take all EU gaming revenue from the Apple App Store – given the focus of the DMA is just in Europe, for now – that would equate to 8% of App Store revenue, 2% of Apple Services revenue, and a ~1% hit to Apple company-level revenue and EPS,” the analysts said. Apple generated $20.77 billion in services revenue during its fiscal first quarter of 2023.

But even if Microsoft is able to successfully acquire Activision Blizzard and launch an app store, Morgan Stanley analysts are not convinced that it will be cause for concern at Apple.

In 2022, analysts found that Microsoft and Activision Blizzard had an “immaterial impact” on Apple’s company-level revenue, as they accounted for less than 1% of total Apple Services revenue combined.

“We estimate the impact of a potential Microsoft App Store on the iPhone would be limited to <3% of App Store revenue and <0.5% of EPS, but it still represents the biggest potential threat to the App Store today,” they wrote in a Tuesday note.

MacDailyNews Take: So, even without Morgan Stanley analysts seemingly bothering to figure in the very real potential for the existence of multiple app stores to entice Android switchers to flock to iPhones and iPads in even greater numbers than today, the “biggest potential threat” to Apple’s App Store is irrelevant.

Got it. Accumulate Apple shares.

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