Google CEO doesn't see problem with his Apple role

Google Chief Executive Eric Schmidt is taking a government inquiry into his role on Apple Inc.'s board in stride, expressing confidence that the probe won't find any evidence that the ties between the two companies throttle competition in mobile phones and other technology fields.

In a media session held Thursday before Google's shareholders meeting in Mountain View, Schmidt said he hasn't considered stepping down from Apple's board because he doesn't view the maker of the iPhone, iPod and computers as a "primary competitor." He echoed that sentiment when a shareholder later asked him to step down from Apple's board to avoid further government scrutiny.

Google attorney Kent Walker confirmed the Mountain View-based company is in talks with the Federal Trade Commission about whether its overlapping board relationships with Apple violates federal antitrust laws. The inquiry was reported by The New York Times earlier this week.

Both Schmidt and former Genentech CEO Arthur Levinson are directors at Google and Apple.

Walker told reporters that Google is "comfortable" that it doesn't generate enough revenue in the same markets as Apple for Schmidt's and Levinson's dual roles on the companies' boards to violate antitrust law.

Google makes most of its money from online advertising driven by its market-leading search engine. But it is the chief architect of an operating system called "Android" that already runs some mobile devices similar to the iPhone. Android also is going to be in some low-cost computers, called "netbooks," later this year.

Schmidt, who joined Apple's board in 2006, told reporters he always recuses himself from all Apple board discussions involving the iPhone, but doesn't avoid talks about any other subject.

Cupertino-based Apple and Google also both make Web browsers that are vying to lure users away from Microsoft Corp.'s Internet Explorer and the Mozilla Foundation's Firefox. As its YouTube video site expands, Google also conceivably could clash with Apple's iTunes store.

The shareholder who asked Schmidt to quit Apple's board during Google's annual meeting thinks the interlocking board relationships eventually will cause headaches for Google.

"There is no reason for it because it isn't adding any value for shareholders," said Brandon Rees, a representative for the AFL-CIO's holdings in Google. "There is really nothing to gain and a lot to lose. We don't want Google to become an antitrust devil like Microsoft did."

Schmidt scoffed at a similar analogy during his session with reporters, asserting "there is no comparison" between Google's behavior and Microsoft's attempts to stifle competition in the computer software market during the 1990s. Microsoft's tactics eventually triggered an antitrust battle that forced the software maker to change its ways.

Still, the FTC inquiry is one of several signs that the government is taking a closer look at Google and its increasing dominance in Internet search and advertising. Last year Google scrapped a proposed Internet advertising partnership with Yahoo Inc. to avoid a legal battle with the U.S. Justice Department.

Before retreating, Schmidt had repeatedly predicted the Yahoo alliance would withstand antitrust scrutiny.

Now, the Justice Department is reviewing a proposed legal settlement with authors and publishers that would expand Google's digital library of books. Regulators are responding to complaints lodged by some librarians and consumer activists who are worried the proposed settlement will give Google a digital monopoly on millions of books.

A federal judge in New York recently granted a four-month extension to object to the settlement, setting a new deadline of Sept. 4.

Schmidt predicted the book settlement will lead to a "fundamentally good outcome" by giving more people around the world a better chance to buy and read out-of-print works.

He also said Google understands it's more likely to attract government scrutiny because of its dominance of Internet search and its sheer size. By some measures, Google now processes more than 70 percent of U.S. searches, helping it to generate nearly $22 billion in annual revenue.

"Information is incredibly important and we should expect governments around the world to be interested in what we do and hold us to the principles we have articulate," Schmidt said, referring to Google's corporate motto to "do no evil."

The Google shareholder meeting was a mostly amiable affair, just like the previous four that the company has held since its August 2004 initial public offering. This year marked the first time that neither of Google's co-founders, Larry Page and Sergey Brin, appeared on stage with Schmidt to take questions. Brin also missed the 2007 meeting because he was getting married then, but Page was on hand.

No shareholders attending Thursday's meeting expressed concerns about Google's slowing revenue growth — a factor that has contributed to a 32 percent drop in the company's market value since last year's annual meeting. Google shares fell $6.86 Thursday to close at $396.61.