Analysts Torn on Whether Google-Apple Competition Is Heating Up

 
 
By Clint Boulton  |  Posted 2009-08-04
 
 
 

Analysts Torn on Whether Google-Apple Competition Is Heating Up


When Google CEO Eric Schmidt stepped down from Apple's board of directors Aug. 3, it touched off a wellspring of questions.

How did it happen? Did Apple CEO Steve Jobs boot Schmidt, or was it a mutual decision to alleviate regulatory concerns? Maybe it was the Federal Communications Commission's inquiry into Apple's rejection of the Google Voice application.

Google and Apple compete in smartphone software and Web browsers, and will go head-to-head in computer operating systems next year. With the number of competitive markets between Google and Apple booming to three in the three years since Schmidt joined Apple's board, clearly something had to give.

So will this make the storied partners more competitive with each other? Opinions vary among high-tech analysts who cover the companies.

Analysts such as Rob Enderle, Enderle Group founder, believe Jobs pushed Schmidt out and so Schmidt will be seeking revenge on Apple.

"He was effectively fired, so I'd expect that would focus Google more tightly on Apple," Enderle told eWEEK. "This is probably a good thing for Google because it forces them to come up with a customer experience that possibly might exceed Microsoft's as opposed to what they have been doing, which is something less."  

Sterling Market Intelligence analyst Greg Sterling, on the other hand, believes it was a mutual agreement, likely triggered by the FCC's inquiry into the Google Voice rejection combined with the Department of Justice's concern about the interlocking directorates provision in the Clayton Antitrust Act.

"The presence of Schmidt on the board may have created favoritism [toward Google] that has now been removed, but they're still on good terms," Sterling told eWEEK. "This isn't the beginning of some war between Google and Apple."

Technology Business Research analyst Ezra Gottheil told eWEEK he doesn't see Schmidt's removal from Apple's board changing anything between Google and Apple. "It's simply a recognition of something that's become increasingly clear-that the two companies are already competing in smartphone operating systems, and will be competing in PC operating systems."

The Growing Rivalry Between Google and Apple


Yet even the federal government recognizes the growing competition between Google and Apple. The Federal Trade Commission Bureau of Competition Director Richard Feinstein commended Apple and Google for recognizing that sharing directors raises competitive questions as Google and Apple increasingly compete with each other.

That competition, almost nonexistent in August 2006 when Schmidt joined Apple's board, is strikingly clear today even if it is newfound.

Apple launched its iPhone smartphone two years ago and has sold millions of the devices. Google launched its Android mobile operating system nearly two years ago and now has a few phones using it in the market, including the T-Mobile G1 and, beginning Aug. 5, the T-Mobile myTouch 3G in the United States, as well as the HTC Hero in Europe.

That's a pittance compared with the iPhone, but Google expects roughly 20 Android devices on the market by 2010. That breadth of choice will beget real competition for Apple.

Nearly a year ago, Google launched Chrome, the company's flavor of a Web browser that is much more friendly to Web apps. Though fewer than 2 percent of Web users are actively using it, it competes with Apple's Safari browser, Mozilla Firefox and Microsoft Internet Explorer.

Last month, Google unveiled Chrome Operating System, which will support the Web apps running in Chrome. Intended for netbooks of all kinds, Chrome OS will compete with computers running Apple Mac OS X, as well as Microsoft Windows machines.

Even though Chrome OS isn't ready yet, TBR's Gottheil believes Chrome OS may be a bigger threat to Apple's Mac platform than Android is to the iPhone. "When you consider Chrome OS' potential to offer PC buyers an attractive alternative to Macs, Google's activities could impinge on more than 70 percent of Apple's revenue," Gottheil said.

Finally, there is Google Voice, the Web calling management application Apple kept from the iPhone App Store because it has features that overlap with the iPhone.

Though Voice is not built on Android, it impacts the mobile application market on which the iPhone relies.

Suppose Apple was peeved at Google. Could the company punt Google search for Microsoft's Bing or jettison Google Maps for Yahoo Maps, as Om Malik suggested?

"I think it's an interesting point, but I wouldn't exaggerate the significance of this in terms of Apple's interest in or willingness to use Google's products," Sterling said.

"Apple will continue to use best-of-breed products where Google has them, or with Yahoo but not Microsoft. Also, now that Yahoo's search will basically be Bing with a Yahoo interface, that puts a check on Apple abandoning Google search."

Apple, Sterling said, will absolutely not go for Microsoft products. But what if Apple launches a search engine? That's food for thought.


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