Google's Schmidt quits Apple's board; Jobs cites conflicts

Should have happened long ago, says analyst, given the iPhone's importance

Apple today announced that Eric Schmidt, Google's CEO, has resigned from Apple's board of directors, citing the increased competition between the two companies.

Schmidt's position on the board has been questioned for several months as Google increasingly strayed onto Apple's turf. In May, the U.S. Federal Trade Commission (FTC) reportedly opened an inquiry into whether Schmidt's position on both companies' boards was a violation of antitrust laws. The calls for Schmidt to quit Apple intensified early last month after Google announced Chrome OS.

But Schmidt, both in May and last week in an interview with the San Jose Mercury News, said possible conflicts could be handled by recusing himself from discussions where overlap existed.

Today, Steve Jobs, Apple's CEO, disagreed.

"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," said Jobs in a statement early Monday. "Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple's Board."

Google and Apple compete in the browser market -- the former with Chrome, the latter with Safari -- as well as in mobile phone operating systems (Android versus iPhone) and personal computer operating systems (Chrome OS versus Mac OS X). Previously, Schmidt was recusing himself from board discussions about the iPhone.

"This was necessary," said Ezra Gottheil, an analyst with Technology Business Research. "They were beginning to step on each other's toes in all kinds of places."

In fact, the move should have come earlier, he said. "It probably should have happened before, given how important the iPhone is to Apple and how aggressive Google has been with its mobile operating system."

The inquiry last week by the Federal Communications Commission (FCC), which asked Apple, AT&T and Google to explain how and why Google Voice was rejected from the iPhone App Store, wasn't a factor in Schmidt's departure, Gottheil said.

"It was a coincidence," he said. "That's much less of a board-interlocking issue, and more the changing philosophy of this administration."

For his part, Schmidt accepted Apple's rationale for his need to leave. "I have very much enjoyed my time on the Apple Board," he said in a statement. "It's a fantastic company. But as Apple explained today, we've agreed it makes sense for me to step down now."

Schmidt has been on the Apple board since August 2006. Apple did not announce a new board member to take Schmidt's place or a timeline for filling the vacancy.

Two other current members of Apple's board also have ties to Google. Former Vice President Al Gore, for example, is on Apple's board and is a senior advisor to Google, while Arthur Levinson, the former chairman and CEO of Genentech, is on the boards of both companies.

Copyright © 2009 IDG Communications, Inc.

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