Wall Street Downplays Google-Apple Collision Scenario
October 01 2009 - 5:17PM
Dow Jones News
Google Inc. (GOOG) is increasingly pushing into the markets for
mobile phone software and computer operating systems, areas where
Apple Inc. (AAPL) has strongholds. Because the business models of
the Internet giant and the hardware maker are so different,
however, a head-on clash is unlikely anytime soon.
The latest round of rumors suggesting the two tech giants are
girding to compete came Thursday as speculation mounted Apple had
purchased online mapping start-up Placebase Inc. to free itself
from Google's mapping technology, which now comes with Apple's
popular iPhone.
The speculation over a possible Placebase deal stemmed from
Apple's apparent hiring of two top executives from the small Los
Angeles mapping software company. That provoked a host of blog
posts suggesting the once-cozy relationship between the two
partners appears to be cooling.
That might be jumping the gun. While Google's new Android
cellphone operating system is starting to gain traction and it
plans to release its Chrome computer operating system soon - both
of which could challenge Apple products - Wall Street analysts
quickly point out the Mountain View, Calif. search giant doesn't
participate in one of Apple's core markets: hardware.
"I don't really view Google and Apple as competitors," said
Kaufman Brothers analyst Shaw Wu. "I really don't see that changing
a lot in the next couple years."
Google declined to comment. Apple was not immediately available
for comment.
The chummy relationship between Google and Apple appeared to
deteriorate in July when Apple said it had turned down the Google
Voice iPhone application in its current form because it seemed to
alter the iPhone's core functions and interface. Apple's decision
prompted a request for information from the U.S. Federal
Communications Commission.
Late last month, Google raised some eyebrows when it said Apple
had "rejected" Google Voice, contradicting Apple's contention that
it was still studying Google's application.
Meanwhile, Google Chief Executive Eric Schmidt resigned from
Apple's board in August amid growing regulatory scrutiny over deep
ties between the boards of the two companies. Apple CEO Steve Jobs
said the mutual decision to step down made sense as Google entered
more of Apple's core businesses.
"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," said Jobs in a statement.
Despite the cooling relationship, Wall Street analysts say the
two companies are still so different they are unlikely to get in
each other's way soon.
Google counts on search advertising for about 97% of its revenue
and many analysts say that figure is not expected to significantly
shift soon. Apple, in contrast, gets about 82% of its revenue from
the sale of computer hardware, iPod music players and iPhones, as
well as related products and services.
"By and large, their businesses don't overlap and are quite
complementary," said Andy Miedler, analyst at Edward Jones.
Piper Jaffray analyst Gene Munster says Google's Android is a
minor issue between the companies at this point, even though many
bloggers point to mobile phones as a potential turf battle.
He also notes that while Schmidt may have left Apple's board,
the Google CEO turned up when Jobs recently unveiled the company's
latest lineup of iPods.
"If things were truly getting more abrasive between the two, why
was Schmidt at the Apple event?" he asked.
He also argues that Google has little to lose even if it steps
on Apple's toes because Apple doesn't have much choice but to keep
using Google as the default search engine for its Safari Web
browser, as well as on its iPhone.
Google shares closed down 1.7% Thursday at $487.20, while Apple
shares closed down 2.4% at $180.86 on a down day for the
market.
-By Scott Morrison; Dow Jones Newswires; 415-765-6118;
scott.morrison@dowjones.com; and Ben Charny, 415-765-8230;
ben.charny@dowjones.com