Apple CEO Steve Jobs and Google CEO Eric Schmidt were spotted and photographed drinking coffee Friday in Palo Alto, California.

“Photos of Schmidt and Jobs talking were snapped and sent to Gizmodo,” AppleInsider reports. “Jobs was in his trademark mock turtleneck and jeans at the cafe Calafia in the Town and Country shopping center. The establishment is owned by former Google chef Charlie Ayers.”

MacDailyNews Note: According to eyewitnesses, that’s a menu, not an iPad on the table.

AppleInsider reports, “Jobs was overheard by the photographer as saying two things: ‘They’re going to see it all eventually, so who cares how they get it,’ reportedly said about Web content. And, ‘Let’s go discuss this somewhere more private,’ after a crowd began to gather around the two. The report said that Schmidt was mostly quiet and listening while Jobs did most of the talking.”

AppleInsider reports, “‘The fact they’d meet in a neutral place like this implies, although does not prove, they chose a public place for its neutrality,’ Gizmodo’s Brian Lam wrote. ‘Or they just wanted coffee and inevitably started talking shop, albeit in public. But since when do billionaires have to step out for coffee? The only thing that adds up is that neither felt comfortable meeting at each other’s HQs, and this is the start of talks that will inevitably be tense for both sides.’”

Jobs’ familiar Mercedes-Benz SL 55 AMG was also spotted parked out front.

Full article here.

Gizmodo’s full article is here.

MacDailyNews Take: This was obviously done in public in broad daylight for a reason (to be announced at a later date). Also, the body language is fairly screaming. Who looks comfortable and who doesn’t?

[Thanks to MacDailyNews Readers "iWill," "Babakool," "Michael W.," "JMS in TX," and "Scarbro" for the heads up.]