Google CEO Schmidt, Apple Board Part Ways; Jobs: ‘Effectiveness Diminished’

*Google* CEO Eric Schmidt is leaving the Apple (NSDQ: AAPL) board after all, following months of brushing aside suggestions that increasing competition in the same areas created a conflict of interest. In a statement released before the market opened, Apple CEO Steve Jobs explained: “Unfortunately, as Google (NSDQ: GOOG) enters more of Apple’s core businesses, with Android and now Chrome OS, Eric’s effectiveness as an Apple Board member will be significantly diminished, since he will have to recuse himself from even larger portions of our meetings due to potential conflicts of interest. Therefore, we have mutually decided that now is the right time for Eric to resign his position on Apple’s Board.” Schmidt joined the board in 2006.

It’s not clear when the decision was made but the announcement comes just days after the Federal Communications Commission started an inquiry into the reasons Apple rejected a Google Voice app for the iPhone. The FCC sent letters to Apple, AT&T (NYSE: T) and Google Friday; Apple and Google are being asked to explain how they make decisions about apps for iPhone and Android respectively.

Was that the last straw? If so, it should never have to come this.

The two companies have been on a collision course for years, the two corporate tracks coming closer together as Google moved further away from being a search company. In the time Schmidt has been on the Apple board, Google has expanded its web apps business into a web-based competitor for software and services provided by Apple, has created a phone competitor to iPhone in Android, and is now working on an operating system of its own. At the same time, Google has a strong presence on the iPhone, with Google Maps, Google Search and YouTube as well-publicized pre-installs.

A few days before the Google Voice app issue went public, the Google Mobile team explained its Latitude application for iPhone was being released as a web app, instead of an official iPhone app at Apple’s request: “After we developed a Latitude application for the iPhone, Apple requested we release Latitude as a web application in order to avoid confusion with Maps on the iPhone, which uses Google to serve maps tiles.”

As Paul Kedrosky posted on Twitter while I was writing this, “Having to recuse yourself from board discussions of a co’s fastest growing product (iPhone) is a sign you’re (Schmidt) on wrong board.” If everyone else could see that, why did it take Apple and Schmidt so long?

Update: Then there’s the FTC investigation into whether Scmidt’s presence on both boards as well as that of former Genentech CEO Arthur Levinson raised antitrust problems. The FTC says its inquiry will continue. More on that here.