It might be the closest thing the tech world has to a backhanded compliment.
On Wednesday, reports surfaced that Microsoft (MSFT) was in talks with Apple (AAPL) to make its Bing search engine the default option for Apple's blockbuster iPhone, replacing Google (GOOG). The thwarting maneuver by the two technology stalwarts with a deep-rooted, decades-long rivalry is testament to Google's growing might. But for Google investors, it should serve as a reminder that the search giant has a tendency to bite off more than it can chew.Deals in technology have a tendency to fall apart and are often more about posturing than anything else. So iPhone users shouldn't count on Bing being their default search engine just yet. But the fact that Apple, a company long seen as a Google ally – Eric Schmidt, Google's CEO served on Apple's board until last summer and Google's maps were marketed prominently when the iPhone launched – would even entertain defecting to Microsoft demonstrates how frantically the tech world is scrambling to deal with the search giant's expanding clout.
Apple and Microsoft are not alone as they worry about Google's rise. The old media guard is increasingly vocal in its resistance. News Corp. (NWS), for example, has howled about Google's use of its content. Viacom (VIA) had also lobbed a $1 billion suit at Google on similar grounds.
Telecom giants like AT&T (T) are also thought to be working to undermine Google behind the scenes. Not only are there tensions about hot button issues like net neutrality, but Google's push into phone services challenged their existing carrier businesses.
And now there is China, where Google is in the midst of tense standoff following massive cyber attacks on its services. While many have commended the company for pushing for more openness in the authoritarian country, the skirmish also presents a major headache and lost business opportunity for Google.
Google's outsize ambitions have hardly served shareholders, however, and all the acrimony may be hurting partners and investors alike.
Despite big plans to upend countless industries, 95% of Google's revenue still comes from search advertising. With revenue growth sharply declining, new investors are unlikely to get on board before the company can make real headway in other businesses.
But rivals like Microsoft have now made it a point to capitalize on the distrust Google's ambition breeds across industries. Potentially poaching Apple would be a big victory on that front.
Some Google partners like Motorola (MOT) – which staked its turnaround on Google's Droid mobile operating system – with much less breathing room than the search giant also suffer the consequences of the companies strategy, meanwhile.
On Wednesday, some analysts at Morgan Stanley took down their estimates for Motorola's Droid handsets by 500,000 to 1.5 million because of Google's tensions with China. Google has put a freeze on launching mobile phones in the country as talks progress.
The blow to Motorola comes amid speculation that CEO Sanjay Jha may have been badly burned when Google launched its own phone and became a direct competitor to the handset maker.
But despite all the bad blood, some estimates put Google's first week sales at a mere 20,000. The iPhone, which the Nexus One was hyped to seriously challenge, sold 1.6 million units over the same timeframe.
Google's approach will only make it easier for Microsoft to poach potential partners. And the company will have little to show for it when it comes to the bottom line if it keeps going down this path.
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