Aug. 3 (Bloomberg) -- Google Inc. Chief Executive Officer Eric Schmidt is resigning from Apple Inc.’s board, amid intensifying rivalry between the two companies and concern that sharing directors may hurt competition.

Schmidt’s effectiveness as a director will be “significantly diminished” as he needs to recuse himself from more meetings because of potential conflicts of interest, Apple CEO Steve Jobs said in a statement today. The decision was mutual, he said.

Google has expanded into computer and mobile-phone software, creating direct competitors to Apple’s products. Schmidt’s move is a reversal from his stance three months ago, when he said he had no plans to resign amid speculation that his overlap on Apple’s board violated U.S. antitrust rules.

“You can’t serve two masters,” said Keith Bachman, an analyst at BMO Capital Markets in New York. He advises investors to buy Apple shares and doesn’t own them. “Google and Apple are increasingly on a collision course.”

Google is developing a computer operating system based on its Chrome Web browser, competing with software from companies including Apple. Google’s Android mobile-phone operating system also competes with Apple’s iPhone software.

Google, based in Mountain View, California, added $9.16 to $452.21 in Nasdaq Stock Market trading at 4 p.m. New York time. Apple, in Cupertino, California, rose $3.04 to $166.43.

Interlocking Boards

The U.S. Federal Trade Commission said today it has examined “for some time” whether the companies are breaking antitrust law by sharing board members and commended Schmidt’s resignation. The FTC said it will keep investigating “remaining interlocking directorates” between Apple and Google.

Genentech Inc. Chairman Arthur Levinson has board seats at both Apple and Google, and the FTC may review whether that violates antitrust law, said Joe Angland, an antitrust lawyer at White & Case LLP in New York.

The FTC is looking at whether the interlocking boards could hurt competition in markets such as mobile-phone software and services, a person familiar with the investigation said in May. Google has to be more careful in its engagements with other companies as it moves beyond Web search, Angland said.

“As Google winds up expanding into different areas, it will find it no longer has the freedom to interact with companies the way it once did,” he said.

Schmidt, 54, has served on Google’s board since 2001 and on Apple’s since 2006. Levinson, 59, has been at Google since 2004 and at Apple since 2000. Levinson declined to comment, Genentech spokesman Geoff Teeter said.

Android, IPhone

Steve Dowling, an Apple spokesman, had no additional comment beyond the statement. He declined to say whether the board will seek a new director to replace Schmidt. Peter Kaplan, an FTC spokesman, declined to comment on Schmidt’s resignation.

“I have very much enjoyed my time on the Apple board,” Schmidt said in an e-mailed statement. “It’s a fantastic company. But as Apple explained today we’ve agreed it makes sense for me to step down now.”

Apple sells the iPhone, which runs Google Maps and gives users the ability to play videos from Google’s YouTube. Google, owner of the world’s most used search engine, helped develop Android, software that runs mobile phones.

Google Voice Rejection

Last week, Google said that Apple rejected its program for the iPhone that allows people to make free calls. The Google Voice application lets users place U.S. calls, send text messages and organize voice mails without charging fees. The U.S. Federal Communications Commission began an inquiry into Apple’s rejection of the program.

The companies are starting to compete in computer operating systems, with Google’s Chrome OS set to be introduced next year. Computer makers are also planning to offer Android as an alternative to Microsoft Corp.’s Windows.

Without Schmidt, Apple’s board will consist of Jobs, 54, and six outside directors. In addition to Levinson, former U.S. Vice President Al Gore, and Millard “Mickey” Drexler, CEO of J. Crew Group Inc., serve as directors.

Intuit Inc. Chairman Bill Campbell, an Apple board member since 1997 and co-lead director with Levinson, has served as an adviser to Google. Gore is also an adviser to Google.

To contact the reporters on this story: Amy Thomson in New York at athomson6@bloomberg.net; Nikolaj Gammeltoft in New York at ngammeltoft@bloomberg.net

Last Updated: August 3, 2009 16:22 EDT