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CNBC took some time to talk to Eric Schmidt at Davos.  Among the topics discussed was the stagnant economy in the West, which Schmidt sees as an opportunity for the Internet (though he also sees opportunities in better times).

In addition, a big trend for 2012 will be $60 to $70 smartphones— Google’s sweet spot.  Phones from ZTE and others from China are already hitting those points.

Finally, Schmidt talked about Google’s Apps and its effect on businesses and the incumbent (Microsoft). Transcript follows:

i just spoke with eric schmitt. there’s a lot of debate right now on whether or not we’re seeing another bubble created in tech. i’ve got eric’s take on that, as well as where we go from here in mobility. a trend he says will have long legs for some time to come. i want to get your take on where we are, first, in the economy. where do you see the strength and weakness globally right now? everybody seems sluggish. there’s just not enough demand. in the united states there’s a slow recovery, which is a jobless recovery, which is a big political and human issue. in europe they decided by themselves a decision to simultaneously have a recession. are you feeling that, from where you sit? are you feeling the ripple effects of the european crisis? in a tough time like this, you can use the internet to substitute lest expensive ways to get to your customers, it’s more effective. the internet does not seem to be as affected as other industries. we haven’t seen it as hard as others. what do you see as the next huge trend that we may be focused on? it’s still going to be about devices, in particular, phones, and things that look like phones. prices will fall dramatically. we’re in the rich part of the world so we can afford the $400 phones. phones that are powerful like the ones we have now will end up at $60, $70, which makes them affordable for a billion or so people. each of those phones can be thought of as having access to information. you have to enable this. it can be health monitoring, or serve as entertainment. lots of new educational tools will be available for that. people, especially outside of the western world, will rely on mobile phones in fundamental ways. because they don’t have access to libraries and televisions at the same level we take for granted. let me turn to what’s going on at google right now. the company reporting earnings last week. i think it was the highest revenue ever. yes. even though the analysts wanted more. there was some talk in the market that 2012 is going to be a tough year because the company’s navigating antitrust issues. if you go back to a year ago, the exact same thing was said in the beginning of 2011. we had at least 27% revenue growth year over year. i think most companies of any size would be happy with that. at our scale, this kind of revenue growth is extraordinary. and it’s occurring because the platform that we provide for information is just even more useful. so we hope that that will continue. i know you are innovating. but largely advertising is the bread and butter — we love advertising. we innovate in lots of ways in advertising. advertising is a way that people want to get their messages out. and there are many parts of advertising that can be further automated. frankly, what’s happening is that the historic advertising is not very trackable, it’s not very measurable. so as we sort of work on this, we come up with new ways to make sure that your advertising dollar is better spent. tell me some of the other innovations. and what you might like to see as far as generating more revenue, as a percentage of the company, away from advertising. well, the big story is going to be for a while our success in the enterprise.because we seldom talk about this, but we’re seeing corporation after corporation replace the incumbent, typically microsoft infrastructure, by google apps, and they do that because the technology is more modern, it’s more flexible, it’s more web based. this goes under the name of cloud computing.corporations, small, medium and large, are much more flexible ways of managing information. at google, for example, weobviously use all of this. it would be impossible for us not to use it, because everything is shared. one thing to think about it, your viewers spend a lot of time taking attachments and e-mailingthem around. in a world that we power, you never share things that way. you just work on them together and they’re always in front of you. you don’t have to use e-mail to make your networks work. we’re going to be expanding our google plus reach by providing the same google plus capabilities that you personally use to talk about the things that you’re doing in your show, and many of us use to get our message out, those facilities will be available for corporations as well. in terms of expanding intonew innovations, does that come through acquisitions? in the traditional google businesses, what you see is new solutions generate new revenue. if you can come up with a product that has 100 million users, you can find some way to make money from it. even if the product is free, people need service, this eneed support or applications can be built on top of it. so we typically like to solve some interesting new problem, and then once it’s of a certain scale, we say, how could we make money.is this a bubble, once again, in social media? in reality, they’re trading on a private market, and as the companies come into the public market they’ll be subject to the same physics at everybody else. in the tech market, your valuation is the present value

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