When Google executives gathered to discuss fourth quarter 2009 earnings on Thursday, talk turned to Apple and the iPhone. CEO Eric Schmidt said Google (NASDAQ: GOOG) and Apple have “a stable relationship,” and that the search giant “was not going to speculate on rumors.”
Schmidt’s comments came in response to questions about rumors that Apple
(NASDAQ: AAPL) might be ready to drop Google as the default search engine on the iPhone in favor of Microsoft’s Bing.
Smartphones based on Google’s Android operating system are seen as a fast-growing competitor to the iPhone and recent speculation is that Apple doesn’t want to support a competitor that represents a significant threat to its mobile ambitions.
Last year Schmidt was forced to resign from Apple’s board of directors as the conflict of interest over being privy to a mobile competitor’s plans became more apparent. “I have a special spot in my heart for Apple,” said Schmidt. “It’s a very well run company that we also compete with and have special partnerships with.”
For the bulk of the call, Google executives were bullish in discussing the company’s most recent results and the outlook going
forward. Google reported bang up fourth quarter results including an adjusted profit of $2.19 billion or $6.79 a share, on $6.67 billion in sales which was a 17 percent increase over the year-ago quarter.
“Naturally I think part of our success is the result of a very focused product strategy,” said Google’s Vice President of Product Management Jonathan Rosenberg. “At the end of 2009, we doubled down on our core search services and YouTube and invested in Chrome OS and Geo services.”
Google has been criticized by some for juggling too many projects that don’t have a clear revenue upside, but Rosenberg said the company has actually made an effort to scale back. “We shut down Lively (a 3D virtual environment) and the audio ads effort and taken a more wood behind fewer arrows approach,” he said.
Rosenberg also took note of Google’s efforts during the last quarter to add real-time search results from Twitter and other social networks. “There was a 4.1 earthquake here in California last week and Google search was showing me tweets about it in minutes. This (kind of thing) looks easy but we had to build dozens of new search technologies to process hundreds of millions of texts,” he said.
Users can expect more social-related advances as well. “I think people think of social networks but we believe the entire Web is social,” Rosenberg said. “You’re more likely to trust a restaurant or movie review from a friend so those results, only for you, should be rated higher,” he said
Schmidt said Google continues to invest and sees a huge opportunity in online display advertising where Yahoo is considered the market leader. He also said Google has “quite a healthy enterprise business we expect to grow rapidly in the next several years” along with the trend of more companies moving to cloud computing.
The CEO also briefly addressed the Nexus One smartphone, insisting the Google device is not designed to compete directly with Google’s partners.
“What the Nexus One is really about is a new way of buying a phone. It’s the first in a series of examples of purchasing a phone online, that is self-provisioned and you just have it work.
“It doesn’t exclude others or the retail market which will be quite successful and our retail partners understand that,” Schmidt added.
The China question
During the Q&A session, Schmidt briefly addressed Google’s surprise announcement last week that it may leave China because of the country’s censorship policies and a number of cyber attacks it thinks emanated from China, possibly under the auspices of or with the cooperation of the government there.
Separate attacks targeted Google and over 30 other U.S. companies as well as human rights activists in China — the latter involving what Google said were unsuccessful attempts to break into the activist’s Gmail accounts.
In a nod to the accuracy of media reports on the matter, Schmidt said the events related to Google and China were “quite well covered in the press.”
He said Google announced three reasonably separate facts:
“There were cyber attacks probably emanating from China. We believe we’ve made changes to prevent future attacks.
“These attacks were perhaps related or unrelated to monitoring of human rights activists. And (third), a decision by Google that we’re no longer willing to apply the censorship rules in China.”
For now, Schmidt said it continues to operate the same in China, adhering to the country’s strict censorship rules. “In a reasonably short time we expect to make changes there,” said Schmidt, noting that Google is in discussions with Chinese officials to see if there’s a way it could continue to operate in China without bending to censorship rules.
“We would like to stay in China and remain quite committed to being there. We like the Chinese people,” he said.