Why Steve Jobs Fears Google (and Hates Eric Schmidt)

What's got Apple CEO Steve Jobs so worked up about Google? One word: Android.

Over the last six months, Google's (GOOG) open-source mobile operating system has gone from a standing start to over 7% market share, according to the latest data from research firm comScore. And that trend is likely to continue. "Google's Android platform continues to see rapid gains in market share," comScore concluded.

Research in Motion's (RIMM) BlackBerry platform remains the smartphone leader with 43% share, with Apple (AAPL) second at 25.1%. Microsoft (MSFT) is in third, dropping 4% to 15.7%. At this pace, Google could overtake Microsoft in a matter of months, thus moving within striking distance of Apple. "We see Android's market share growing 400% over the next two years," says Trip Chowdry, an analyst at Global Equities Research.

This is why Jobs fears Google -- and why he's launched an all-out war to stifle the search giant's mobile ambitions.

A Battle for Domination

This war goes beyond just smartphones. It's about the operating systems and applications that will run on the next generation of mobile devices: smartphones, laptops, netbooks and of course, tablet computers. RIM's BlackBerry platform, Apple's iPhone system, Google's Android OS and Microsoft's new Windows 7 Phone Series are on the cusp of a bruising competition for domination in the mobile market.

And as the Internet goes mobile -- along with the advertising that drives the Web economy -- the company with the best mobile platform will attract the best developers, applications and, of course, the most users. Despite some early stumbles, Android's growth has been impressive, and Google's first branded phone, the Nexus One, has attracted some influential early adopters.

"Google is gaining at the expense of Microsoft, while Apple's growth rates have slowed a bit. We also think Android is taking share away from RIM," Chowdry says, citing his own research. Google scored an early boost by signing pacts with Motorola (MOT), HTC and Samsung to build Android-powered products. The company also was the beneficiary of Verizon's (VZ) heavy promotion of Morotola's Droid device in TV spots that mocked the iPhone.

Taking It Personally

After Verizon's Droid ad campaign -- "Everything iDon't...Droid Does" -- it's not surprising that the fiercely competitive Jobs has begun the take the battle with Google personally. Just a few years ago, the companies were close allies. But as Google has moved into the mobile market, tensions have erupted. Google CEO Eric Schmidt left Apple's board last year, and now Jobs apparently feels like Google has "picked his pocket" in the mobile space, according to The New York Times.

"Mr. Jobs believes that Google violated the alliance between the companies by producing cellphones that physically, technologically and spiritually resembled the iPhone," the paper reported Sunday. In essence, Jobs feels like Schmidt double-crossed him.

Perhaps that's why Jobs reportedly unloaded on Google during a recent speech to employees, during which he allegedly said Google was trying to "kill" the iPhone, but he wouldn't allow it. He also called Google's "Don't be Evil" motto "bullshit." Two weeks later, Apple launched a massive lawsuit against HTC -- which makes the Nexus One handset -- accusing the Taiwan-based phonemaker of infringing on 20 patents related to the iPhone, including aspects of the touch screen and user interface.

The ultimate target of the lawsuit is clear: Google's mobile ambitions. And the search giant quickly stepped up to defend its partner. But HTC isn't the only handset maker in Apple's sights. According to Oppenheimer analyst Yair Reiner, Apple has held a series of high-level meetings in recent months "to underscore its growing displeasure at seeing its iPhone-related [intellectual property] infringed."

Will Jobs's Bullying Backfire?

"The lawsuit filed against HTC appears to be Apple's way of putting a public, lawyered-up exclamation point on a series of blunt conversations that have been occurring behind closed doors," Reiner wrote in a recent note to clients, adding that his sources "suggest that these warning shots are meaningfully disrupting the development roadmaps for would-be iPhone killers."

Ultimately, Reiner suggests, Apple should be careful about being too aggressive in its intellectual property battle with the giant smartphone makers. "Apple's legal maneuvering appears to have temporarily retarded its rivals' hot pursuit of the iPhone," Reiner concluded. "But it also potentially brings Apple a step closer to a head-on legal confrontation with an array of gargantuan adversaries."

Apple's obvious fear of Android may have already begun to backfire: Jobs's own statements, coupled with the HTC lawsuit, ironically may make Android appear to be an even more formidable player than it already is. "Developers I know aren't getting less interested in Google's Android platform, they're getting more interested -- Apple's actions are enhancing that interest," former Sun Microsystems CEO Jonathan I. Schwartz wrote in a recent post, in which he recalled Jobs's threat to sue him in 2003.

Apple and Google may once have been natural allies. But no longer. And given Jobs's intense feeling of personal ownership of Apple products, it should comes as no surprise that Google's aggressive move into smartphones and mobile media has angered him. Given the egos involved, this could get nasty -- and expensive.
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