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Is Apple Grooming Schmidt For CEO?

By: David Utter

Google's CEO has joined the board of directors for Apple, and the move has many wringing their hands in anticipation of what that could mean; we think there is another meaning no one has considered yet.

Is Apple Grooming Schmidt For CEO?Now that Apple (AAPL) has Google's (GOOG) Schmidt on board, guesswork has begun on what will happen next. Apple announced his election to the board yesterday.

"Eric is obviously doing a terrific job as CEO of Google, and we look forward to his contributions as a member of Apple's board of directors," said Steve Jobs, Apple's CEO. "Like Apple, Google is very focused on innovation and we think Eric's insights and experience will be very valuable in helping to guide Apple in the years ahead."

Commentary from some industry observers indicates a belief that the news and Schmidt's future work on Apple's board will shake the entire technology world. GigaOm's Om Malik called it "worries for everyone" in his take on the announcement, with an emphasis on Microsoft (MSFT):

It is hard to argue with the timing of the appointment, despite corporate PR speak. Microsofts ZUNE effort is coming soon, and this could mean a long drawn out, and costly skirmish for King Jobs. Bills boys are going to spend their enormous hoard of cash to buy into the digital media - music, movies and whatever - space. No one can outspend Microsoft, but one can outsmart them. An Apple-Google informal alliance is one way of taking on Microsoft and its coterie.

Don Dodge, director of business development for Microsoft's Emerging Business Team, mocked the news as a "Barney Agreement" and reminded readers of the last big news concerning Eric Schmidt and another tech company:

Several months ago there was a big joint press conference between Google and Sun Microsystems. Eric Schmidt was formerly CTO of Sun so the speculation was that they would cooperate on several levels, perhaps releasing a special version of StarOffice to compete with Microsoft. The speculation was wrong and the press conference was basically a non-event.

Without customer demand, Dodge noted, all the potential synergies between Apple and Google won't matter.

Schmidt should be a solid choice for Apple's board. The excitement over his election, like Valleywag's comment that "one thing's sure: this has to be a lousy day at Microsoft HQ," may miss the point.

Google brought Schmidt on as chairman in March 2001, when he replaced then-chairman co-founder Sergey Brin; Schmidt later picked up Larry Page's CEO title a couple of years later, as Google began preparations for its IPO.

Schmidt's tenure as CEO of Novell and CTO of Sun Microsystems were unspectacular. At Google, the hard work had been accomplished already, between Page and Brin's search engine work and Omid Kordestani's efforts to drive contextual advertising as a revenue source. The company just needed a steady presence in the CEO chair, not someone who would try to reinvent Google.

Apple is currently embroiled in the middle of a SEC investigation into the backdating of stock options. That could get a lot worse if Apple execs are found to have been acting on insider information as well.

Jobs has sold Pixar to The Walt Disney Company, and is now on the board at Disney. He has battled pancreatic cancer, a tiring experience for anyone. Between Apple's SEC troubles and the potential for health issues to crop up, maybe Jobs didn't bring Schmidt on to be just a director.

Apple is facing the prospect of restating years of financial numbers. That's the kind of situation that costs CEOs their jobs, and even someone as iconic as Steve Jobs may see his days as being numbered. Schmidt could be in the process of being groomed to replace Jobs should the need arise.

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