SCHMIDT: ALL THESE TECH COMPANIES HIT THE S-CURVE. THEY GO THROUGH A RAPID GROWTH PERIOD THEN SLOWS BECAUSE OF LAWS OF LARGE NUMBERS. YOU'RE GROWING, JUST CAN'T PUT ENOUGH NUMBERS ON THE BOARD. YOU SOLVE THAT BY HAVING NEW BUSINESSES.WE'RE BUSY WORKING ON THAT. THE DISPLAY BUSINESS, WHICH IS A HUGE OPPORTUNITY WHICH WE SHOULD BECOME A HUGE PLAYER IN BUT WE ARE NOT. MOBILE SHOULD BE A LARGE ONE. THE WAY YOU ADDRESS THAT SLOW DOWN IN ANY TECHNOLOGY BUSINESS IS YOU KEEP ADDING OTHER BUSINESSES THAT ARE GROWING.

CRAMER: DIDN'T BALMER THINK OF THAT AND GATES THINK OF THAT, IT DIDN'T WORK.

SCHMIDT: THAT IS A DIFFERENT GENERATION. THIS IS AN ADVERTISING GENERATION AND ADVERTISING IS A MULTI-SECTOR THINGS WE CAN DO THIS AD REALLY WELL, BUT THERE'S A LOT OF OPPORTUNITIES FOR US. THEY'LL ORGANIZE THEMSELVES AS TECHNOLOGY ALLOWS. SOME OF THEM WILL GROW FASTER THAN THE OTHERS THAT'S HOW WE ADDRESS THAT QUESTION.

CRAMER: I USED TO MANAGE MONEY FOR INTEL EXECUTIVES IN THE LATE '80s, WHEN THEY SWITCHED FROM A COMMODITY PRODUCT, THE THING THEY RECOGNIZED WAS THAT THEIR ONLY ENEMY WOULD BE THE GOVERNMENT. THEY BELIEVED THAT ONE DAY, THEYCOULD HAVE 90% MARKET SHARE. I WORRY THAT AT A CERTAIN PLACE,THE WORLD, CERTAINLY THE U.S. GOVERNMENT, WILL COME DOWN ON YOU BECAUSE YOU'RE JUST TOO DARNED POWERFUL. EACH MONTH, I SEE YOUR SHARE GO UP. AT A CERTAIN LEVEL PEOPLE ARE GOING TO GO TO WASHINGTON AND SAY IT ISN'T RIGHT.

SCHMIDT: WE'VE TALKED ABOUT THIS BECAUSE OUR ALGORHYTHMS ARE DOING BETTER. IT APPEARS WE'RE GETTING SHARE.OUR ADVERTISING BUSINESS WE HAVE THE BEST TECHNOLOGY IN THE BUSINESS AND SO FORTH, HOW DO WE BEHAVE?NOT THE WAY MICROSOFT DID.I WOULD NEVER DO THAT.

CRAMER: YOU'RE NOT GOING TO SAY THOSE NASTY THINGS?

SCHMIDT: WE ARE JUST NOT GOING TO DO THAT SO HOW YOU BE BIG WITHOUT BEING EVIL? WE DON'T TRAP END USERS, SO IF YOU DON'T LIKE GOOGLE, WE MAKE IT EASY FOR YOU TO MOVE TO OUR COMPETITOR. WE'RE TRYING TO MAKE SURE A COMPETITIVE MARKET IS MAINTAINED.

CRAMER: I KNOW THE YAHOO DEAL ON THE SURFACE ISN'T COMPETITIVE.

SCHMIDT: BUT LOOK AT IT THE YAHOO DEAL IS NONEXEXCLUSIVE, TEXT ADS ONLY. ITS A CLASSIC OUTSOURCING DEAL FOR SOME OF ITS ADVERTISING. THEY CAN CHOOSE TO USE IT OR NOT T'S A GOOD DEAL FOR THEM AND FOR US.THEY'RE FREE TO WORK WITH WHO THEY WISH.

CRAMER: ONE THINK THAT'S BEEN BROUGHT UP A LOT IS THAT YOU MUST BE SEEING SOME CYCLICALITY -- WE KNOW THE AIRLINE'S IN TROUBLE, WE KNOW THAT TRAVELS IN TROUBLE WE KNOW THAT AUTO IS IN TROUBLE THAT'S BEEN WRONG, HASN'T IT?

SCHMIDT: IT'S BIZARRE.AUTOS ARE IN TROUBLE BECAUSE THE DEALERS ARE SMART.THEY MOVE TO MORE TARGETED ADVERTISING TO SELL WHAT THEY HAVE. SO WE CAN DO WELL IF PEOPLE MOVE TO MORE TARGETED OR MORE ROI BASED ADVERTISING. THE ONES BEING HIT ARE THE NONMEASURABLE ADVERTISING.

CRAMER: THAT'S NEWSPAPERS AND MAGAZINES

SCHMIDT: AND TRADITIONAL DISPLAY ADS.

CRAMER: l WHEN I TELL MY KIDS TO READ

"THE NEW YORK TIMES," THEY HAVE NO IDEA WHAT I AM TALKING ABOUT THEY SAY THEY GO TO GOOGLE.THAT'S WHAT "THE NEW YORK TIMES"IS.WHAT DO YOU SAY TO THE EXECUTIVES AT "THE NEW YORK TIMES" WHO HAVE $500 MILLION AD BUDGET. WHY ARE YOU NOT JUST THE PARASITE

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