by Tom Kaneshige

Apple-Google Dustup: Winners and Losers

Aug 04, 20093 mins
Consumer ElectronicsiPhoneSocial Networking Apps

Apple loses Google CEO Eric Schmidt's Web insight, while Google delivers products in key Apple markets. Consumers breathe a sigh of relief.

When Apple announced today that Google CEO Eric Schmidt is resigning from Apple’s board, the blogosphere let out a collective sigh of relief. In other words, it’s about time. “Apple is well known for its secrecy around future products and directions,” says Gartner analyst Charles Smulders, “the increasing overlap in products in recent months was bound to raise issues.”

Google’s new products go head-to-head with Apple’s core software offerings. Thus, Schmidt’s presence on Apple’s board was increasingly becoming a conflict of interest. The New York Times reported last spring that the Federal Trade Commission was investigating whether the close ties between Apple’s and Google’s boards of directors violates antitrust laws. (Reuters reports the investigation will continue despite Schmidt’s resignation.)

In an Apple press release, CEO Steve Jobs said: “Unfortunately, as Google enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple’s Board.”

The Clayton Antitrust Act of 1914 prohibits a person’s presence on the board of two rival companies when it would reduce competition between them. With today’s news, the thinking goes that arguably two of the most innovative tech giants will face off without collusion – and thus consumers stand to benefit.

There’s no question Google benefited from Apple’s technical know-how in key areas. Schmidt told the San Jose Mercury News before his departure from Apple’s board: “Apple and Google have a lot of technical partnerships. The underpinnings of Chrome are the same as that of Apple’s Safari browser … We collaborate on the maps area. We have a large number of iPhone apps.”

Apple, of course, benefited greatly with Schmidt on its board. As Google’s CEO, Schmidt held unique perspectives on the Web and cloud computing environments, Smulders says. “Apple will now need to get those perspectives from other sources.”

The truth is that Silicon Valley execs have historically been an incestuous lot. Top Oracle execs, for instance, have held CEO positions in, Siebel Systems, NetSuite, PeopleSoft and others. Indeed, Ray Noorda, then CEO of Novell, popularized the phrase “coopetition” in the early 1990s to describe tech relationships.

As for Google and Apple, Smulders says, Schmidt’s exodus from Apple’s board “does not necessarily mean an end to coopetition” between the two companies.

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