Apple 2.0

Covering the business that Steve Jobs built

Why Google's CEO had to leave Apple's board

August 3, 2009: 2:06 PM ET
Jobs and Schmidt. Photo: Apple Inc.

Jobs and Schmidt. Photo: Apple Inc.

Much has changed since Eric Schmidt joined Apple's (AAPL) board of directors in August 2006, almost three years ago.

Schmidt, the former chief technology officer of Sun Microsystems (JAVA) and now the CEO of Google (GOOG), brought to Apple's board deep expertise in Web search and advertising, a shared distrust of Microsoft (MSFT) and almost no conflicts of interest.

But in the past three years the areas of overlapping interests -- from smartphones to browsers to operating systems -- have grown so great that the Federal Trade Commission in May opened discussions with the two companies about whether Schmidt's presence on Apple's board constituted a violation of the Clayton Antitrust Act. (link)

And on Friday the Federal Communications Commission launched a pointed inquiry into Apple's decision to bar a powerful Google voice mail management program from its iPhone App Store -- an inquiry that put Schmidt and Apple CEO Steve Jobs on opposite sides of a Federal investigation.

Finally Jobs announced on Monday what had come to seem an inevitability: that Schmidt was off the board.

"Eric has been an excellent Board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful," Jobs said in a prepared statement. "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." (link)

Although pressure on Schmidt to step down had mounted in recent weeks, Schmidt told attendees at a technology conference as recently as July 10 that he saw "no issue" with his remaining on the board. (link)

But Apple's decision to reject Google Voice -- an important application into which Google had sunk a lot of time and money -- may have been the last straw.

"If nothing else," writes TechCrunch's Erick Schoenfeld in Why Schmidt Had to Go, "last Friday's letters from the FCC [were] a wake-up call to Apple that Google stands on the opposite side of the fence when it comes to the evolution of the mobile Web. Google wants the mobile Web to be as open as the Internet. ... Apple is not about being open. It never has been...

"Google wants to diminish the importance of any single computing device in favor of Web apps which sit in the cloud and are accessible from all devices -- mobile phones, Macbooks, Dell laptops, or whatever. As much as is physically possible, it wants to replace the operating system with the Web.

"Ultimately, that is a bigger threat to Apple than Microsoft ever was."

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About This Author
Philip Elmer-Dewitt
Philip Elmer-DeWitt
Editor, Apple 2.0, Fortune

Philip Elmer-DeWitt has been following Apple since 1982, first for Time Magazine, and now on the Web for Fortune.com.

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