Apple 2.0

Covering the business that Steve Jobs built

Steve Jobs to Ed Colligan: Dear sir, let's collude

August 20, 2009: 7:47 AM ET
Jon Rubinstein. Photo: Palm, Inc.

Jon Rubinstein. Photo: Palm, Inc.

"We must do whatever we can to stop this."

That's how Apple (AAPL) CEO Steve Jobs is reported to have asked then Palm (PALM) CEO Ed Colligan to enter into a possibly illegal agreement to stop trying to hire away each others' top engineering talent.

If accurate, it may be one of the most stilted attempts to collude ever recorded.

Colligan's answer, according to Bloomberg's Connie Guglielmo, who says she has reviewed the two-year-old communications:

"Your proposal that we agree that neither company will hire the other's employees, regardless of the individual's desires, is not only wrong, it is likely illegal."

Is this really how conspirators talk?

Apparently so in Silicon Valley, where hiring practices long overlooked have come under increased scrutiny by the Obama administration.

In June the New York Times reported that the U.S. Department of Justice had begun an antitrust investigation into whether Apple and Google (GOOG) had a written agreement not to go fishing in each others' talent pool -- a deal that could be considered a collusive restraint on trade.

Google's anti-poaching smoking gun

Such an agreement between Apple and Palm could be even more problematic, since at the time the two were gearing up to compete head on in the smartphone market. In his Aug. 2007 communication, Colligan claimed that Apple had hired away 2% of Palm's workforce to help develop the iPhone.

Palm, meanwhile, had hired Jon Rubinstein, the former Apple engineering VP who headed the team that built the original iPod. Rubinstein, in turn, had begun recruiting Apple engineers and marketing experts to work on the Palm Pre.

That's what Jobs was allegedly trying to stop.

Apple vs. Palm: Geeks with grudges

According to Bloomberg, the exact details of what Jobs proposed to Colligan aren't known; Jobs didn't mention a proposal in the communications reviewed by Guglielmo. He did say that Apple had a lot of patents and more money than Palm if the companies ended up in a legal battle.

According to Bloomberg, the Justice Department may investigate the exchange between the companies even though Palm rejected Apple's proposal.  "If I were at DOJ, I would definitely be interested," Daniel Rubinfeld, a former deputy assistant attorney general for antitrust, told Guglielmo.

Apple has declined to comment. And Jobs, according to Guglielmo, has not returned her e-mail.

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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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