Cloud War: Google's Schmidt Resigns Apple's Board

In a move that many observers believed was long overdue, Google CEO Eric Schmidt today resigned from Apple’s board.

The two companies have clashed recently on the issue of Google’s iPhone applications, to the extent that the Federal Communications Commission said only days ago that it’s looking into Apple’s rejection of the search giant’s Google Voice app. But even before that, Google’s moves into operating systems, including its mobile Android software, and the release of its Chrome Web browser were bringing the companies into more conflict. Although Schmidt said he simply sat out discussions where there might be a conflict, the increasing overlap of Apple’s and Google’s businesses clearly was making it difficult for Schmidt to remain effective on the board he joined three years ago.

Not least, the Federal Trade Commission has been looking into whether Schmidt’s presence on Apple’s board constituted potentially anti-competitive behavior because of the overlap in the companies’ businesses. And today, the agency said it’s planning to continue its investigation.

But a brief statement by Apple CEO Steve Jobs was blunt that the competitive situation was key, saying the two companies were butting up against each other entirely too much:

“Eric has been an excellent Board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful,” said Steve Jobs, Apple’s CEO. “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.”

Analysts said they’re not surprised. “The decision was mutual and understandable in our view, especially given that Schmidt has, for some time, been unable to fully participate in AAPL’s board meetings because of this building issue,” Standard & Poor’s equity analyst Scott Kessler wrote in a note this morning. “It also underscores the increasing competition between the companies, as GOOG pursues opportunities in operating systems, browsers and applications.”

Google’s shares were rising about 2%, Apple’s a little under 2%, in early trading Monday. Both those increases are considerably higher than the 1% rise in the S&P 500 and the Nasdaq exchange.

As recently as Sunday, in an interview in the San Jose Mercury News, Schmidt was quoted repeating his insistence that recusing himself from issues that might present a conflict of interest should allow him to stay on Apple’s board, though he sounded rather less certain than before:

Q Google and Apple are increasingly in the same businesses, namely operating systems for mobile phones and now with the announcement of the Chrome OS, personal computers. Is it also becoming increasingly problematic for you to be on Apple’s board?

A I am not sure about the board question. The board question can be solved by recusing yourself, which I do with the iPhone. It is also important to remember that unlike Microsoft and Google, Apple and Google have a lot of technical partnerships. The underpinnings of Chrome are the same as that of Apple’s Safari browser. There is a lot of collaboration around Web standards. We collaborate on the maps area. We have a large number of iPhone apps. There are significant benefits to Apple and to Google for me to be on both boards with the caveat that you mentioned that you have to be very careful.

Despite the recent battle over Google’s iPhone apps, Schmidt’s comments do point out that Apple and Google continue to have common interests as well. But as computing increasingly moves to the cloud, services once offered on discrete platforms will compete more directly for people’s time and attention. Schmidt’s departure from Apple’s board is another warning sign of more conflicts to come—what siliconANGLE’s John Furrier calls a “cloud collision”—among tech giants across once-distinct sectors from hardware to software to services.

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