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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 slunkius on 12/14/2012 6:02:09 AM , Rating: 2
so what's your point? should apple give away iOS for free and go into advertising business? different strategies for different companies. for now looks like apple is winning (in $$$ department, but that's the point of business). regarding future we can only guess. if someone thinks he knows which company will win 100%, i think he would do better in stock market than on message boards.


By nocturne on 12/14/2012 11:53:12 PM , Rating: 2
Actually read, people.. I'm not extolling one over the other, just trying to quell the thought that Google doesn't profit off of Android. That's just ridiculous! And of course Apple does too! In different ways entirely, though.. like comparing Apples to Googles..

If I was a gambling man though, and you asked me which, if either, would be gone in 30 years.. My money would definitely be on the 'most valuable tech company in the world'.


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