Schmidt Exits Apple Board

iPhone maker cites conflicts of interest
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Google CEO Dr. Eric Schmidt has resigned from Apple's board of directors, on which he has served for the past three years.

In announcing Schmidt's departure, Apple CEO Steve Jobs cited the increased competition that has emerged between Google and Apple now that Google has developed a new browser, Chrome, and is promoting an open operating system for mobile phones called Android.

"Eric has been an excellent board member for Apple, investing his valuable time, talent, passion and wisdom to help make Apple successful," said Jobs in a statement. "Unfortunately, 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. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple's Board."

It is unclear whether Schmidt's resignation is related to the decision by Apple to reject Google's request to offer its "Google Voice" application, which allows a user to make unlimited free domestic calls and send unlimited text messages, in Apple's iPhone App Store. The FCC has begun an inquiry into the matter, sending letters Friday to Google, Apple and AT&T, the wireless carrier that markets the iPhone, asking for details.

In a research note this morning, Sanford Bernstein analyst Craig Moffett suggested that Schmidt's exit from the Apple board should draw even more scrutiny to the Google Voice issue.

"The rejection had already become something of a cause célèbre last week on tech web sites and blogs," wrote Moffett. "The risks posed to AT&T's business by the Google Voice app are self-evident."

Moffett added that the issue of such "application suppression" is a critically important one for the wireless industry, "as it cuts to the heart of longer-term pricing expectations for voice and text messaging services."

The Federal Trade Commission, which has been concerned about the overlap of the Apple and Google boards, was pleased with the move but said that did not end its concern. "We have been investigating the Google/Apple interlocking directorates issue for some time," said FTC Bureau of Competition Director Richard Feinstein, "and commend them for recognizing that sharing directors raises competitive issues, as Google and Apple increasingly compete with each other. We will continue to investigate remaining interlocking directorates between the companies."  

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