Steve Job: Google bethrayed Apple with Nexus One

source: nyt.com
Apple’s Spat With Google Is Getting Personal
Three years ago, Eric E. Schmidt, the chief executive of Google, jogged onto a San Francisco stage to shake hands with Steven P. Jobs, Apple’s co-founder, to help him unveil a transformational wonder gadget — the iPhone — before throngs of journalists and adoring fans at the annual MacWorld Expo.

Google and Apple had worked together to bring Google’s search and mapping services to the iPhone, the executives told the audience, and Mr. Schmidt joked that the collaboration was so close that the two men should simply merge their companies and call them “AppleGoo.”

“Steve, my congratulations to you,” Mr. Schmidt told his corporate ally. “This product is going to be hot.” Mr. Jobs acknowledged the compliment with an ear-to-ear smile.

Today, such warmth is in short supply. Mr. Jobs, Mr. Schmidt and their companies are now engaged in a gritty battle royale over the future and shape of mobile computing and cellphones, with implications that are reverberating across the digital landscape.

In the last six months, Apple and Google have jousted over acquisitions, patents, directors, advisers and iPhone applications. Mr. Jobs and Mr. Schmidt have taken shots at each other’s companies in the media and in private exchanges with employees.


This month, Apple sued HTC, the Taiwanese maker of mobile phones that run Google’s Android operating system, contending that HTC had violated iPhone patents. The move was widely seen as the beginning of a legal assault by Apple on Google itself, as well as an attempt to slow Google’s plans to extend its dominion to mobile devices.

Apple believes that devices like smartphones and tablets should have tightly controlled, proprietary standards and that customers should take advantage of services on those gadgets with applications downloaded from Apple’s own App Store.

Google, on the other hand, wants smartphones to have open, nonproprietary platforms so users can freely roam the Web for apps that work on many devices. Google has long feared that rivals like Microsoft or Apple or wireless carriers like Verizon could block access to its services on devices like smartphones, which could soon eclipse computers as the primary gateway to the Web. Google’s promotion of Android is, essentially, an effort to control its destiny in the mobile world.

While the discord between Apple and Google is in part philosophical and involves enormous financial stakes, the battle also has deeply personal overtones and echoes the ego-fueled fisticuffs that have long characterized technology industry feuds. (Think Intel vs. A.M.D., Microsoft vs. everybody, and so on.)


Yet according to interviews with two dozen industry watchers, Silicon Valley investors and current and former employees at both companies — most of whom requested anonymity to protect their jobs or business relationships — the clash between Mr. Schmidt and Mr. Jobs offers an unusually vivid display of enmity and ambition.

At the heart of their dispute is a sense of betrayal: Mr. Jobs believes that Google violated the alliance between the companies by producing cellphones that physically, technologically and spiritually resembled the iPhone. In short, he feels that his former friends at Google picked his pocket.

“We did not enter the search business. They entered the phone business,” Mr. Jobs told Apple employees during an all-hands meeting shortly after the public introduction of the iPad in January, according to two employees who were there and heard the presentation. “Make no mistake: Google wants to kill the iPhone. We won’t let them.”

One of these employees said Mr. Jobs returned to the topic of Google several times in the session and even disparaged its slogan “Don’t be evil” with an expletive, which drew thunderous applause from his underlings.

Apple declined to comment for this article. Larry Page and Sergey Brin, Google’s co-founders, have openly expressed admiration for Mr. Jobs, and Google says it isn’t at war with its former ally. “Apple is a valued partner, and we have great respect for everything they have done for technology for more than 30 years,” says Jill Hazelbaker, a Google spokeswoman.

In a statement, Mr. Schmidt concurred. “I continue to believe, as many do, that Steve Jobs is the best C.E.O. in the world today, and I admire Apple and Steve enormously,” he wrote.

Despite such sentiments, the tech world at large is watching the battle between Apple and Google with shock and awe.

“I’m sure it is going to get uglier,” says David B. Yoffie, a professor at Harvard Business School who has studied the tech industry for decades. “To beat Apple, Google is going to have to be very aggressive. If they are successful, it will put price pressure on Apple and the iPhone.”

One well-connected Silicon Valley investor, who did not want to be identified talking about the Google-Apple feud, says he is stunned by the level of rancor he’s witnessed.

Apple bid $600 million for AdMob, led by Omar Hamoui. Then Google bought it for $750 million.

“It’s World War III. Amazing animosity is motivating two of the most powerful people in the industry,” he says. “This is emotional. This is the biggest ego battle in history. It’s incendiary.”

THE fight features two Valley veterans whose styles couldn’t be more different. Mr. Schmidt is a brainy technologist turned executive. He is measured and professorial in public, but takes pride in being tough.

Along with Mr. Page and Mr. Brin, he has infused Google with an intense competitiveness and an almost evangelical belief that its engineers can do just about everything better than its rivals.

Mr. Jobs, of course, is the master marketer and innovator who exerts authoritarian control over every aspect of Apple. Since he helped to found the company in 1976, he has been known to elevate the fight against rivals — first I.B.M. and Microsoft, and later Dell — into corporate calls to battle, using the specter of the enemy to motivate employees and sharpen Apple’s image in the public eye.

But in this latest battle with Google, his actions appear to be unusually emotional. In filing the lawsuit over Android phones, he positioned his company as an aggrieved victim finally standing up to the playground bully. “We can sit by and watch competitors steal our patented inventions, or we can do something about it,” he said in a statement when the suit was filed. “We’ve decided to do something about it.”

Google said that day that it wasn’t a party to the suit but that it would “stand behind” HTC. And, privately, some Google executives say they worry that the lawsuit could hold back Android, which is also being built into tablets that could rival the iPad.

Mr. Schmidt hasn’t shied away from taking public swipes at Apple, either. In January at the World Economic Forum, when asked what he thought of Apple’s new iPad, due to go on sale early next month, he joked to reporters: “You might want to tell me the difference between a large phone and a tablet.”

Although Mr. Jobs and Mr. Schmidt both began working in Silicon Valley in the late 1970s, their paths rarely crossed. But by 2001, with Mr. Jobs back at Apple and Mr. Schmidt running Google, they shared a singular mission: limiting Microsoft’s hegemony to the personal computer and ensuring that Bill Gates didn’t dominate the frontier of online services and mobile devices.

When Mr. Schmidt was invited to join Apple’s board in 2006, he and Mr. Jobs lavished praise on each other.

Behind the scenes, closer bonds between the two companies had formed. Google’s co-founders, Mr. Page and Mr. Brin, considered Mr. Jobs a mentor and, according to a former Apple executive, were regular visitors to Mr. Jobs’s office in Cupertino, Calif., during Google’s early days.

Mr. Brin was also known to take long walks with Mr. Jobs near his house in Palo Alto, and in the nearby foothills of the Santa Cruz Mountains. According to colleagues, they discussed the future of technology and planned some joint ventures that never came to fruition — like a collaborative effort to develop a version of Apple’s Safari browser for Windows.

Another former Google executive said Mr. Page and Mr. Brin “spoke very openly about their admiration for Jobs and how he’s a role model for them as they grow into becoming executives.” Mr. Page and Mr. Brin declined to be interviewed. People close to the company say they are disappointed that the relationship with Apple has soured.

Still, they and other Google executives see the company’s push to open up the industry and to succeed in mobile computing as too important to sacrifice just to placate Mr. Jobs.

BY all accounts, Mr. Schmidt and Mr. Jobs were never close friends. But they dined together on several occasions, according to a former associate of Mr. Schmidt’s, and Mr. Jobs never hesitated to call Mr. Schmidt directly to voice his opinions. Mr. Schmidt, several friends say, relished his position on Apple’s board and the proximity it gave him to one of the most famous figures in American business.

But it didn’t take long for friction to emerge. When Apple began selling the iPhone in 2007, Google was already quietly ramping up efforts to develop Android, its own smartphone operating system.

Two years earlier, Google had acquired the start-up that was developing Android. At the time, the move was largely aimed at Microsoft and meant to ensure that it didn’t wind up controlling the market for mobile devices. But when Microsoft faltered in the emerging smartphone market, and other companies like Research In Motion and then Apple began to dominate instead, Google continued to push ahead with Android and its vision of a more open mobile phone ecosystem.

As Google’s plans took shape, Apple and Google executives either met in person or spoke on the phone on multiple occasions about Apple’s concern about Android, executives on both sides say.

Many of those meetings turned confrontational, according to people familiar with the discussions, with Mr. Jobs often accusing Google of stealing iPhone features. Google executives said that Android’s features were based on longstanding ideas already circulating in the industry and that some Android prototypes predated the iPhone.

At one particularly heated meeting in 2008 on Google’s campus, Mr. Jobs angrily told Google executives that if they deployed a version of multitouch — the popular iPhone feature that allows users to control their devices with flicks of their fingers — he would sue. Two people briefed on the meeting described it as “fierce” and “heated.”

While Google listened to Apple, it rarely backed down. “I don’t think they made many accommodations,” says a former Google executive who was briefed on the discussions. “Google is not a company that is particularly afraid of anyone, including Apple.”

Google did proceed cautiously with Android, at least initially. The first versions of the software, which appeared on devices in 2008, didn’t feature multitouch. The phones were slow and unwieldy, and Google insiders joked that they looked like bricks.

But as Android-powered devices kept improving, Apple became more concerned. When Mr. Jobs returned to work from a prolonged health leave last year, he faced an array of emerging Android-powered phones like the Motorola Droid, with sleeker lines, improved performance and, like the other Android phones, the ability to run multiple applications at the same time.

Highlighting the escalating rivalry, Verizon ran ads for the Droid that took aim at the iPhone with the tagline “Everything iDon’t ... Droid Does.”

AS tensions mounted between Mr. Schmidt and Mr. Jobs, their infighting became more public. When Google tried to get its voice mail management program, Google Voice, onto the iPhone, Apple blocked the effort last July, citing privacy concerns. Then, last August, Mr. Schmidt stepped down from Apple’s board, prompted in part by regulatory concerns over ties between the two companies but also because Apple said his position had become untenable.

When Mr. Jobs announced Mr. Schmidt’s departure from the board, he noted that with Android and plans for a computer operating system, Google was “unfortunately” entering more of Apple’s “core business.”

Then a wrestling match began on the acquisition front.

Last fall, Apple made a formal bid to acquire AdMob, a rapidly growing mobile advertising company, for $600 million. AdMob specializes in developing ads that run inside mobile phone applications, like those on the iPhone.

While Apple conducted due diligence on the deal, AdMob agreed to a 45-day “no shop” provision, a routine clause that prevented the start-up from offering itself for sale to others, according to three people briefed on the negotiations. But after Apple inexplicably let 45 days pass without consummating its offer, Google pounced.

Their interest piqued by Apple’s pursuit of the start-up, Mr. Schmidt, along with Mr. Page, Mr. Brin and other Google executives, began intensely courting Omar Hamoui, AdMob’s young chief executive. AdMob, the Google guys argued, belonged in their corporate family because Google — unlike Apple — was an old pro in advertising. They also promised that AdMob employees would be able to cash out stock options sooner than Apple’s deal would have allowed. It also didn’t hurt that Google was willing to pay a 25 percent premium over Apple’s offer.

Three days after the no-shop provision expired, Google agreed to buy AdMob — putting a whopping $750 million price tag on a four-year-old company with modest revenue. Jilted and angry, Mr. Jobs speculated that AdMob might have violated its legal obligations, with help from Google, according to two people briefed on the fallout from the negotiations.

(Neither AdMob nor Google would comment on any aspect of the process. The acquisition is being reviewed by the Federal Trade Commission for possible antitrust problems.)

One executive familiar with Google’s acquisitions strategy said the company was willing to pay a large premium for AdMob simply to keep the company out of Apple’s arms. “There is no way AdMob would have gotten $750 million if he wasn’t worried that it would end up in the hands of Steve,” the executive said. “Are they going to get $750 million in cash flow back? No way.”

Apple rebounded quickly, buying Quattro Wireless, a rival to AdMob, for close to $300 million in January — signaling that Apple and Google would duke it out for pre-eminence in the ad market for mobile devices.

In the tech press, however, Apple’s announcement was overshadowed by much bigger news. The same day, Google introduced the Nexus One, its flagship phone designed in close collaboration with HTC, which carried some of the unmistakable design flourishes associated with the iPhone.

And later that month, days after Mr. Jobs derided Google’s “Don’t be evil” mantra, Google dropped any pretense of conciliation: it sent out a software update to the Nexus One, adding multitouch capabilities and thereby openly crossing a line that Mr. Jobs had drawn in the sand.

INSIDE both Apple and Google, employees say, the sense of rivalry is intense and a peacemaker is sorely needed. “I’ve never seen anything quite like it in my life,” one Apple employee says. “I’m in so many meetings where so many potshots are taken. It feels weird.”

At Google, which counts Microsoft, Facebook and Yahoo on an ever-expanding list of rivals, the enmity toward Apple is not quite as widespread. After all, the iPhone has helped to fuel the popularity of Google mobile services and ads.

The spat over Google Voice, along with other confrontations, sharpened one of Google’s worst fears: that a rival could keep millions of people from accessing its services. A Google executive vowed to bring Google Voice to the iPhone “one way or the other,” and the company quickly developed a workaround to circumvent the Apple block.

If anyone could negotiate a ceasefire, it would be Bill Campbell, a well-regarded Silicon Valley business counselor known simply as Coach.

Mr. Campbell, a former college football coach and the former chief executive of Intuit, has played pivotal roles at Google. He sat in on high-level management meetings, counseled Mr. Schmidt individually in private sessions every other week, helped to establish the company’s management structure, and had a hand in smoothing over the initially turbulent relationship between Mr. Schmidt and Google’s founders.

Mr. Campbell also looms large at Apple, where he is co-chairman of the board, and was one of the few people in whom Mr. Jobs confided during his health crisis.

While Mr. Campbell has tried to be a diplomat and smooth over the problems between Mr. Jobs and Mr. Schmidt, the task hasn’t been easy. Mr. Campbell declined to comment for this article, but people briefed on the matter say that throughout last fall, Mr. Jobs and Mr. Schmidt each lobbied Mr. Campbell to sever his connection with the other’s company, at times even giving him ultimatums to do so.

Finally, Mr. Campbell was forced to choose, and according to a person with knowledge of the situation, he dropped his formal responsibilities at Google, although he is still informally mentoring executives there.

Mitch Kapor, the founder of Lotus Development and now a tech investor, describes such infighting as “old wine in a new bottle,” and reminiscent of many past corporate battles in Silicon Valley. He sees the old dynamics between Apple and Microsoft being recycled, with Apple still trying to control every aspect of the user experience, and Google, like Microsoft before it, working with multiple partners to flood the market with a large number of devices.

While mobile phone developers favor the iPhone for now, “they are all racing ahead to develop for Android, too,” Mr. Kapor says. “Tight control helps in the beginning, but it tends to choke things in the long term.”

APPLE and Google remain partners in certain areas. Google pays Apple millions of dollars annually to make its search engine the default on Apple’s Web browser, on the iPhone and soon, perhaps, on the iPad.

But there is wide speculation in technology circles that Apple is preparing to give Google a public black eye: by making Microsoft’s offering, Bing, the preferred search engine on the iPad, and perhaps even on the iPhone. One Apple employee says that Qi Lu, the president of Microsoft’s online services division, was recently seen visiting Apple’s campus in Cupertino to discuss such a deal. Microsoft declined to comment.

A deal with Microsoft may not be a big blow to Google financially, because many iPhone and iPad users will undoubtedly visit Google’s search service from their device’s Web browser. But the backing of Mr. Jobs would amount to a very valuable and high-profile product endorsement for Microsoft, which has been the perennial underdog in search.

And it would present an unlikely sight: Steve Jobs and Apple, running from the arms of Eric Schmidt and Google, into the embrace of Steve Ballmer and Microsoft.