When Google founders Sergey Brin and Larry Page wanted a C.E.O. for their rapidly growing company in 2001, they turned to a technology executive, Eric Schmidt, who had previously worked at Sun Microsystems and Novell. Coincidentally, Yahoo co-founders Jerry Yang and David Filo were also looking for a C.E.O. that year, and they picked a Hollywood insider: Terry Semel, who had run Warner Bros.

Hollywood failed; technology prevailed.

Since signing on with Google, Schmidt, 52, has channeled the founders' strategic vision and the company's technological assets to create a Web-search and online-advertising Goliath, with $5.7 billion in profits in 2007. Yahoo, meanwhile, has fallen behind Google technologically and is now fighting a hostile takeover by Microsoft. For his part, Semel quit last year.

Along the way, Schmidt has become a billionaire several times over, rich enough to buy a Gulfstream G-550 and to fund philanthropic projects like the New America Foundation, a nonpartisan think tank that recently named him chairman of its board. In 2006, he was appointed to Apple's board of directors. But at Google, he faces challenges that didn't exist when he started. Already, growth in search-driven advertising is slowing, and Google's recently announced plan to run ads on mobile phones might not be a hit with consumers. The company's buyout of online-ad firm DoubleClick was approved in March. And a combined Microsoft-Yahoo would pose a more formidable threat than either company alone—which is why Google has offered to help Yahoo fend off the takeover bid.

Schmidt sat down with Condé Nast Portfolio senior writer Russ Mitchell to talk about his plans for Google.

Why does a merged Microsoft-Yahoo pose such a threat to Google?
It's an unstable situation. But the theoretical issue is the concentration of Microsoft's resources and its history, combined with the very large share that it would have in certain applications—like instant messaging and email—that could be used essentially to break the internet and diminish choice.

Break the internet?
All internet-based systems today are highly interoperable, open systems. The whole antitrust trial that Microsoft went through was really about it breaking that.

In favor of establishing its own proprietary standards. But what are you going to do about the deal?
We've indicated that we don't think it's a good idea. All options are open. I don't want to rule out or rule in anything.

 
Also on Portfolio.com:

How Google Works: What's the real magic that drives the search engine?
Search and Destroy: The best shots in the war between Google and Microsoft.
Eric Schmidt Profile: Get the 411 on Google's chief executive.
World According to Michael Arrington: The TechCrunch founder sounds off.
War for the Internet: The full low-down on Microsoft's bid for Yahoo.
Tech Observer: Kevin Maney blogs on the highs and the lows of technology.