Monday, August 03, 2009

Google's CEO to Resign From Apple's Board

Monday, August 03, 2009

Ken Sweet


Apple (AAPL: 166.43, 3.04, 1.86%) said on Monday that Google’s (GOOG: 452.17, 9.12, 2.06%) CEO Eric Schmidt would resign from Apple’s board of directors effective immediately, reflecting the changing competitive environment between two of Silicon Valley’s most iconic companies.

The decision comes as Google’s and Apple’s businesses edge closer together, especially in the world of mobile and data processing, and as both firms receive closer antitrust scrutiny from regulators.

Apple said Schmidt’s resignation was a mutual decision. He was a director at the company for three years.

In a statement, Apple co-founder and CEO Steve Jobs said, “unfortunately, as Google enters more of Apple's core businesses … Eric's effectiveness as an Apple board member will be significantly diminished.”

Google and Apple, while both technology darlings, once worked in separate spheres of technology: one in search, the other in hardware and software. But as technology has evolved, and as Google in particular makes forays into new business lines, Google and Apple find themselves more and more in direct competition.

Apple’s popular and lucrative iPhone and application store now competes with Google’s Android platform -- and its own app store. Google recently announced the development of an operating system called Chrome OS, which could compete with Apple’s OS X.

"It speaks to how the competitive landscape can change so fast in Silicon Valley," said Eric Jackson, fund manager with Ironfire Capital.

Schmidt said in his own statement that he believes Apple is a "fantastic company,” but said “it makes sense for me to step down now."

"They should use this departure to put an independent director on Apple's board," Jackson said. "Boards over time become enamored with 'rock star' CEOs and executives and like to defer to them, when at this time they should be even more involved."

Shares of Apple and Google were higher in Monday trading along with the broader market.

While Apple said the conflict of interest was the primary reason for the resignation, there have been some legal and anticompetitive concerns surrounding Schmidt’s seat on Apple’s board as of late. The Federal Trade Commission has been looking into whether Google and Apple have been violating antitrust laws by sharing board members.

Genentech Chairman Arthur Levinson sits on the boards of both Apple and Google.

The Federal Communications Commission is also inquiring into last week’s reports that AT&T (T: 26.19, -0.02, -0.08%), which owns the network the iPhone operates on, may have prevented Google Voice Internet-telephony software from being distributed on the iPhone app store.

This isn’t Apple’s first brush with corporate-governance controversy. Some shareholders felt earlier this year that the company wasn’t forthcoming enough about Jobs’s health as the revered company co-founder took medical leave and underwent a liver transplant. Apple also was named in the stock-options backdating scandal several years ago, which came before Schmidt was elected to the board.

Google, of course, is no stranger to tech-company rivalries. To name just one recent example, Microsoft (MSFT: 23.83, 0.31, 1.32%) and Yahoo (YHOO: 14.34, 0.02, 0.14%) announced a search deal last week in order to directly compete with Google, and Microsoft is working on a free online version of its Microsoft Office suite that would compete against Google Apps.

Sphere: Related Content
blog comments powered by Disqus