Mobile is the future. Google and Apple know it and a battle royale is brewing.
Apple sees Android phones like the Motorola Droid, right, as iPhone clones. Google says some prototypes predate the iPhone, left.
IT looked like the beginning of a beautiful friendship.
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.
This competition is good for the ecosystem.
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.”
