The Google - Apple wars move to China

Perhaps it was best that Google (GOOG) CEO Eric Schmidt left the Apple (AAPL) board last week. Google immediately announced that it would buy On2 (ONT), a video compression company, a possible threat to Apple's Quicktime media player franchise. Now Google is preparing to challenge Apple in the Chinese handset market.

According to the Financial Times, "China Mobile, the world's largest mobile operator by subscribers, will fire the opening shot in a battle for high-value subscribers with the launch of the 3G OPhone, which runs the Android source code." The number of cellular customers in China is at least double that in the U.S., so success on the mainland is critical to the hopes of any handset operating system business.

China may end up being the most important region in the battle for mobile operating system supremacy. Nokia (NOK) has the world's most broadly distributed OS, the old Symbian standard. Microsoft (MSFT) is desperate to get its phone OS more widely distributed. It clearly sees that its success on the PC has to move to wireless devices to secure the company's long-term success in the operating system business. Android is a direct threat to that.

Google has had little success diversifying outside the search business. It offers a large number of services for free. Its huge YouTube video-sharing operation loses money, according to most accounts. If Android can be a success in China, Google may have found a new line of revenue and be able to shed the "one trick pony" image.

Douglas A. McIntyre is an editor at 24/7 Wall St. He is the former chairman and CEO of On2 (ONT).

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