Eric Schmidt Talks Motorola, Microsoft Immigration and NSA

Google Executive Chairman Eric Schmidt is all fired up about Motorola's launch of the Moto X smartphone, which he enthusiastically showed off during an interview at Sun Valley by using it to snap pictures of our camera set-up.

"The new products are state-of-the-art on a level that's indescribably good," Schmidt told CNBC. "I really like them personally. The company uses them internally. Much faster and better integrated. We've very excited about this. Watch this space."

Schmidt was joined at Sun Valley by two newcomers to the event, Nikesh Arora, Google's senior vice president and chief business officer, and Salar Kamangar, CEO of YouTube and senior vice president of video at Google. CEO Larry Page, who recently disclosed a chronic illness that affects his vocal cords and breathing, was absent.

Despite Schmidt's enthusiasm, Motorola is fighting an uphill battle against Samsung and Apple. But Schmidt smiled and said "winners in one generation may not be in another generation."

"If you told me five years ago Samsung would be the number one smartphone vendor in Android and beaten Apple, I'd say probably not possible, and yet it's true today," he said. "It shows you that innovation is very much alive and well."

(Read More: Motorola Ad Teases Buyer-Customizable Moto X)

Schmidt also spoke about the innovation happening around the power of the cloud. "It's not just the cloud. It's the cloud and these devices, that are personal, very powerful, a new set of apps that make life better, help you, give you guidance—all with your permission of course."

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Eric Schmidt

While Schmidt was wary of commenting directly on Microsoft's reorganization, announced Thursday, he said the changes reflect and industry-wide shift.

"Every company is responding to the new architecture of cloud computing. We're having great success with Google apps and docs in enterprise and Microsoft must be responding to that in some way," Schmidt said.

(Read More: Microsoft Shake-Up: Will Investors Win?)

As to rising competition from Facebook, Yahoo and Twitter, as they improve their ad options, Schmidt said: "The funny thing about advertising is that it's not a zero-sum game. ... Historically, in the digital ad world, pie has gotten larger and it's possible for everyone to win, and it's perfectly possible that will continue to be true for quite some time."

Schmidt was eager to vent his frustrations about the immigration bill stalling on Capitol Hill. "The policy of America to deny visas to technically trained people in the U.S. and shipped to other countries, where they create companies that compete with America, has to be the stupidest policy of all the U.S. government policies," Schmidt said. "It's being held hostage by all these other issues."

(Read More: Why Silicon Valley Wants Immigration Reform)

The other topic Schmidt vented about was the National Security Agency's Prism controversy.

"We were upset because there was a statement made that somehow the NSA had special access inside Google, which was false," Schmidt said. "We clearly stated that's not the case."

"We've also been upset as a company that we're not allowed to talk in details about the nature of such requests [because of the Patriot Act]," he said. "If allowed to do that, people would have a much better understanding if that's appropriate or not."

—By CNBC's Julia Boorstin. Follow her on Twitter: @JBoorstin.