Questions ahead for Google's Eric Schmidt

The search king's chief executive only wanted to talk about health care at a conference in Florida. But there are plenty of other topics to discuss.

Jim Kerstetter Staff writer, CNET News
Jim Kerstetter has been writing about the high-tech industry since the 1990s. He has been a senior editor at PC Week and a Silicon Valley correspondent at BusinessWeek. He is now senior executive editor at CNET News. He moved back to Boston because he missed the Red Sox. E-mail Jim.
Jim Kerstetter
4 min read

It's fair to say there are plenty of things to chat about with Google CEO Eric Schmidt.

Microsoft may be closing in on its whopper acquisition of Yahoo. Google's stock price has slid dramatically since its 52-week high in November. ComScore says bad stuff's a' brewing in Google's U.S. paid-click performance. And the economy, perhaps the only thing that can really slow Google, seems to be headed south.

Schmidt sat down with CNET News.com earlier Thursday for a brief interview at a medical-trade show Health Information Management Systems Society in Orlando, Fla., where Google unveiled its ambitious Google Health initiative. As is his wont as a billionaire executive with many things to do, Schmidt wanted to stick to the script there in the land of Mickey Mouse. For Schmidt, Thursday was all about health care.

Eric Schmidt
Dan Farber/CNET News.com

In fairness, what Google is trying to do in health care is interesting and sure to stoke yet another round of privacy concerns. But let's face it: we want to talk about the other stuff, which Schmidt literally waved aside with a wisp of his left hand.

Oh well. We were hoping for a little "on the state of things" rumination in the vein of the older, more thoughtful Bill Gates. Who knows? Maybe he would have flashed some bravado a la Oracle's Larry Ellison, who once sat in front of about 1,500 people at a company conference, said "OK, shoot," and answered unrehearsed questions from the audience for more than an hour.

No matter, not every successful executive can be colorful. But this will most likely be the year that Schmidt and his Google gang have a chance to prove that they have the chops to manage a company through the bumpy times as well as the good times. Here's what they're facing:

• Microsoft. If Microsoft manages to land Yahoo, it will establish itself as the largest company in a number of Internet categories, including unique monthly visitors, e-mail, and instant messaging. Google will still be the big kahuna of search, with a 56.3 percent share to Microsoft/Yahoo's 31.5 percent share. But landing Yahoo could give Microsoft a better platform from which to launch Web applications and compete with Google in the Webware future.

This has to be just a little personal to Schmidt. After all, it was Microsoft that made his final years in the chief executive's office at software maker Novell miserable. Novell, some of you may recall, enjoyed a brief renaissance when Schmidt took the helm. But Microsoft, as it tends to do, caught up with Novell in that once-fascinating category of network operating systems. I say once-fascinating because Microsoft's utter dominance made it boring until Linux, not Novell's Netware, proved a worthy rival to Windows on the server.

• Trustbusters. It's with no shortage of irony that Schmidt, who was among many who complained about Microsoft's anticompetitive behavior, had to deal with federal and international scrutiny of Google's planned merger with DoubleClick. Payback's a you-know-what. Thankfully for Google, the Federal Trade Commission has signed off on the deal, and European regulators are expected to do the same.

But as Google grows more powerful, scrutiny from Washington is going to be routine. What seems like healthy competition to Google's YouTube today could be tanking competitors looking for a lifeline from their political friends tomorrow. The list of potential bugaboos goes on. When Al Gore was running for president, the rumor making the rounds of Silicon Valley was that Schmidt, an active Gore backer, was going to be his cyberczar. Now he may get that quality time in the capital.

• The economy. In 1965, Gay Talese wrote that a plain-old cold for Frank Sinatra can "send vibrations through the entertainment industry and beyond as surely as a president of the United States, suddenly sick, can shake the national economy."

As Sinatra in his prime was a bellwether for the music industry and all things swingin,' Google has become a bellwether for the Internet economy, and Wall Street is starting to worry that even the mighty search king could be impacted by a souring economy. The Federal Reserve chairman said Thursday that he doesn't expect the ugly "stagflation" of the 1970s, but he acknowledged the coming months could be difficult.

Where does that leave Google? Like Microsoft in desktop software, Cisco Systems in networking equipment, and IBM in, well, everything, Google has grown so big that its health is likely to be indicative of the nation's health. It will take terrific execution to continue to do great while everyone else suffers.

Schmidt's first go-around as a chief executive at Novell was ultimately a disappointment. When things got tough, he got going out the exit. He reportedly promises to stay on at Google for 20 years. The challenges in the coming year and how he responds to them will likely prove whether that's a terribly good idea.

CNET News.com's Elinor Mills contributed to this post.