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Former CEO defends Google using Caribbean tax shelter

While Q3 smartphone sales numbers are slightly deceptive as the much-anticipated Apple, Inc. (AAPLiPhone 5 was yet to launch, it's hard to deny that Google Inc. (GOOG) brightly outpaced its rival in unit sales, with Google's Android taking 72 percent of the market, versus a mere 14 percent for Apple.  In a new interview, former Google CEO Eric Schmidt says that equated to 1.3 million Android smartphones activated a day, a key to Google outselling its rival 5-to-1.

I. Google v. Apple == Microsoft v. Apple Computer?

He compares his company's war against Apple to Microsoft Corp.'s (MSFT) successful campaign against Apple Computer back in the 1980s and 1990s.  He remarks to Bloomberg, "This is a huge platform change; this is of the scale of 20 years ago -- Microsoft versus Apple.  We’re winning that war pretty clearly now."

To Eric Schmidt, the sales triumph is vindication of Google's decision to give away Android to third party OEMs, versus Apple's policy of zealously possessive in-house efforts.  Comments Mr. Schmidt, "The core strategy is to make a bigger pie.  We will end up with a not perfectly controlled and not perfectly managed bigger pie by virtue of open systems."

Eric Schmidt
Former Google CEO Eric Schmidt claims Apple is repeating its own painful history.
[Image Source: The Sydney Morning Herald]

As for his company's and the general economy's outlook, he says he sees signs for optimism in the Chinese recovery.  But he warns that the so-called "fiscal cliff" -- a series of automatic tax increases and spending cuts -- could kill a similar emerging recovery in the U.S.

He warns, "It will be tragic for the country if the sum of the government can’t resolve this.  You can think of what’s going on as one set of special interests versus another, and a big fight and they all have to feel like they’ve been heard."

He sees Europe as another soft spot, saying that region will struggle to recover as southern nations like Spain, Italy, and Greece dangle on the edge of financial insolvency.

II. Schmidt on Gov't Regulation, Taxes

Mr. Schmidt defends his company's decision to shuffle $9.8B USD to a shell company in Bermuda to escape $2B USD in taxes from countries like the U.S., UK, France, and Australia.  

He comments, "We pay lots of taxes; we pay them in the legally prescribed ways.  I am very proud of the structure that we set up. We did it based on the incentives that the governments offered us to operate.  It’s called capitalism.  We are proudly capitalistic. I’m not confused about this."

Gimme Shelter
Schmidt says nothing's wrong with Google using a tax shelter. [Image Source: Hook Worldwide]

On the topic of spectrum crunch, which AT&T, Inc. (T) and others have bemoaned, Mr. Schmidt says it is a real problem, but that smart antennas may be able to help.  He comments, "[True] all the modeling says the existing strategy will run out of cellular bandwidth in 2016 or 2017.  [But] today you get dedicated bandwidth on your phone, and your phone doesn’t say, ’Ah ha! I can go over here or over up here.’ Smart radios can do that."

Google+ was also plugged by the former chief executive, which calls a "viable competitor to Facebook", thanks to its 100 million active users.

Source: Bloomberg

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RE: Uncle Eric lost in the Hall of Mirrors
By sprockkets on 12/13/2012 7:13:45 PM , Rating: 2
You know, why can't you be that normal poster about his nikon camera?

When you post anything about apple or google, you go ape sht for some reason...

By ritualm on 12/13/2012 7:34:30 PM , Rating: 2
Tony makes creationist nutters sound reasonable and intelligent. Mind blowing.

RE: Uncle Eric lost in the Hall of Mirrors
By Tony Swash on 12/13/12, Rating: 0
RE: Uncle Eric lost in the Hall of Mirrors
By Paj on 12/14/2012 8:01:01 AM , Rating: 3
The problem with your arguments (like many here on good old DT) is that it only applies to the US. Indeed, iOS use in the US is higher than Android. But a look at the worldwide stats shows a different story - a clear decline for iOS over the last year, where Android is going strong.

This is attributable to Androids lower price of entry, and greater customisability.

RE: Uncle Eric lost in the Hall of Mirrors
By Tony Swash on 12/14/12, Rating: 0
By nafhan on 12/14/2012 3:55:03 PM , Rating: 3
First of all, the metrics I've seen tend to be focused on US e-commerce, which will usually be skewed more towards iOS than if you looked at the rest of the world.

Secondly, a lot of Android devices are crap to browse on - low end phones on inexpensive VERY limited data plans. That certainly doesn't mean that these people and their possible future purchases don't matter, though. That's an important mind-share and market-share to get for the future.

Third, (this is more personal observation) those on midrange or higher Android phones, I think, tend to have pretty similar usage patterns to someone with, say, an iPhone 5. I personally find the Galaxy SIII to be much nicer to interact with for things like web browsing than an iPhone thanks to it's larger, higher res. screen. The "mid range and higher" people are probably where the majority of the Android "hits" on websites come from.

For the near future, I think the percentage of mobile web browsing originating from Android phones will continue to increase at a rate that exceeds iPhone usage increases. A huge part of this is that the cheap "throw away" smart phones are starting to get good enough to actually be pleasant to use for these types of activities.

By Paj on 12/17/2012 8:28:45 AM , Rating: 2
No, I dont think I did. I agree that the data from the US supports your arguments. I also agree that market share != profitability. Certainly, the App Store is likely to be more profitable for developers.

But this logic doesnt apply to everything.

If we could side step the tribal affiliations for a moment it would be interesting to hear people's ideas as to why there is this profound disparity between platform usage. In particular I would like to know from Android users what may be deterring them from using their Android devices for surfing the web, shopping online, buy apps, clicking on ads, etc

The stats I posted show that more people are using Android browsers for web browsing on a worldwide basis - which directly refutes your point that more people are using iOS for web browsing than Android.

This in turn could reasonably mean that, worldwide, mobile advertising would be more lucrative on Android, as a greater number of impressions for any given ad campaign could be made. This is how advertising is sold.

Also, saying that Android users dont buy things is incorrect, considering that Amazons entire business model is based on content sales - which uses their custom version of Android built into the Kindle range.

By retrospooty on 12/14/2012 8:45:07 AM , Rating: 3
"say where you think my argument breaks down"

Oh oh, let me answer... It's because no-one takes you seriously... You argue and skew info in favor of Apple all the time, 100%, no matter what the situation. There, I guess that wasnt so complex was it.

If you could just once in a while say something that wasn't totally biased and call Apple on their crap or point out some negative thing about their products and/or something positive about a competitor it would go a long way toward anyone even bothering to read you posts. You are like the boy who cried Apple. It's too much Apple Apple Apple, therefore no-one believes anything you write even ifyou do have a point.

Make sense?

By nafhan on 12/14/2012 10:52:24 AM , Rating: 3
I think your problem might be that your conclusions are based on what you would like to see happen rather than what's actually going on in the world of technology.

I mean, you did make the case that the Android platform/ecosystem is doing poorly, when the opposite actually seems to be true - it's growing at a tremendous rate. Google is doing very well with your "Step Three" at this point. The Play store had something like a 300% year over year increase in sales. I'm not seeing the indicators of failure.

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