San Francisco — In a dramatic move that comes as little surprise, on Monday, Google Inc. Chief Executive Officer Eric Schmidt has stepped down from Apple Inc.’s board of directors, due to escalating conflicts of interest between the two companies and concern that sharing directors may impede competition.
“Eric has been an excellent Board member for Apple, devoting his valuable time, talent, passion and wisdom to help make Apple successful,” Apple CEO Steve Jobs said in the release.
“Unfortunately, as Google steeps more into Apple’s core businesses, with Android and now Chrome OS, Schmidt’s effectiveness as an Apple Board member will be “significantly diminished,” because he would have to recuse himself from most parts of our meetings due to potential conflicts of interest, Jobs said in a statement. Therefore, we have mutually decided to part ways as now is the right time for Eric to resign his position on Apple’s Board.”
Schmidt had been on Apple’s board for almost exactly three years, since August 2006.
Jobs said the decision for Schmidt to step down had been reached by mutual consent. His comments were backed up by the departing board member.
“I have very much enjoyed my time on the Apple board,” Google CEO, Eric Schmidt said. “It is a fantastic company. But, as Apple explained today we have agreed it makes sense for me to step down now.”
The three year long sweet association started to become sour as Google expanded into computer and mobile-phone software, and getting into direct competition with 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 cannot serve two masters,” said Keith Bachman, an analyst at BMO Capital Markets in New York. He advises investors to buy Apple shares and does not own them. “Google and Apple are increasingly on a collision course.”
More recently, Google knocked on Apple’s core turf with its third-party applications for the iPhone — which comes pre-installed with Google Maps–started to get well-publicized scrutiny from Apple. Google’s location-aware service Latitude, for instance, has been confined to a Web-based app rather than an installable one, and a Google Voice telephony app was outright rejected by Apple.
Another industry expert Rob Enderle of Enderle Group in Silicon Valley commented that Schmidt should have left Apple’s board of directors since the moment Google first concieved building an Android operating system to power smart phones that challenge iPhones.
Taiwan-based HTC released the first Android-driven “Google phone” in late 2008 and other mobile device makers have followed suit. Apple introduced the original iPhone in 2007.
“Schmidt, unfortunately, like many CEOs got caught up in the celebrity so he did not want to give it up even though it was appropriate,” Enderle said.
Justifying Schmidt’s existence on the Apple board was becoming increasingly difficult to defend as the Cupertino, California-based maker of iPods, iPhones and Macintosh computers competes on an increasing number of fronts with Google.
Google launched a Chrome Web browser in September in a market where Apple’s Safari software is a contender.
Mountain View, California-based Google is building open-source Chrome OS operating system software for lightweight “netbook” computers. As opposed, Apple has struggled for decades in the computer market with Macintosh machines built on its own software.
Last week, the Federal Communications Commission (FCC) has dispatched letters to Apple, Google, and iPhone carrier AT&T seeking more information about Apple’s rejection of a Google Voice application for the iPhone.
FCC chairman Julius Genachowski said “inquiry letters” were sent on Friday to Apple, AT&T, the exclusive carrier for the iPhone in the United States, and Google.
The FCC move comes after Google said a Google Voice application for the iPhone was rejected by the iPhone App Store and related applications were removed.
Google’s latest venture, “Google Voice” that allows users to merge their home, office and mobile phones into a single number. It also allows them to make affordable international phone calls, send free SMS messages and provides transcripts of voicemail messages.
“The FCC review of why Apple pulled Google Voice off of the iPhone made it very clear that the conflicts of interest between Google and Apple made his remaining on the Apple board a serious problem for both companies,” Enderle said, referring to Schmidt.
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.