Apple vs. Google: Tech's Newest Rivalry?

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Then Jobs continued: "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."

Probes by Both the FTC and the FCC

Some observers say less abstract reasons contributed to Apple's decision to bump Schmidt. In May, The New York Times reported that the Federal Trade Commission was investigating whether Schmidt's Apple directorship violated antitrust rules prohibiting companies from sharing directors. On the day Schmidt resigned from Apple's board, Richard Feinstein, director of the FTC's bureau of competition, confirmed that his agency was still investigating the fact that Genentech CEO Arthur Levinson sits on both companies' boards. The Federal Communications Commission on July 31 said it is investigating why Apple refused to let Google Voice be sold on its iPhone App Store.

Given the Obama Administration's signals that it will be more active on the antitrust front than the Bush White House, Schmidt's removal is a pragmatic step by Apple to stay out of trouble, analysts say.

Until now, Google and Apple resolved conflicts by having Schmidt recuse himself from discussions about the Android operating system as a competitor to the iPhone. But given how central the mobile Web is to the computer industry's ambitions for selling hardware, software, content, and ads on a new class of pocketable devices, the tensions between the companies in this area couldn't be swept under the rug simply by having Schmidt step out for coffee.

On a broader level, Apple and Google are vying for the upper hand in answering this era's central technological question: Where should most computing happen? Google's answer is that most computing tasks should happen in the cloud, via software that runs in massive Internet data centers housing users' data, files, and contacts so they're accessible from anywhere.

That's the thinking behind its Android smartphone software and Chrome OS, a thin layer of operating system code that could replace Apple's Mac OS or Microsoft's Windows on PC-like devices. In both cases, Android and Chrome OS's main function is to provide access to the cloud, as well as enough local computing power for whenever users lack a Web connection.

Less and Less Need to Play Well with Others

Apple's vision for the future is very different. Its business is about selling elegant, powerful, high-margin machines that put much of the computing power in your pocket (iPhone), in your briefcase (Macbook), or on your desk (iMac). For that it relies more than any other tech company on so-called "native code" written for a specific machine. "Apple, more than any company in tech history, has been able to create its own proprietary environment," says Hawkins.

In the years ahead, Apple may expand its product portfolio to include pretty much everything consumers need to inform and entertain themselves. Sources say the company will introduce a tablet-style gizmo in the coming months that could be used as a portable TV or for reading digital books. There's nothing to stop Apple from creating TVs that could also be used to view videos purchased on iTunes. The broader this alternate universe becomes, the less Apple would need to work well with others.

Microsoft's epic struggles with IBM, Apple, Netscape, and Google have often put it at the center of the battle to define tech's trends. These days the strongest signals about where the tech sector is heading aren't emanating from Redmond, Wash. Now the fight is centered on Silicon Valley. With Schmidt's departure from Apple's board, a new era of tech rivalry may well begin.

Burrows is a senior writer for BusinessWeek, based in Silicon Valley.

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