Shares of Google (Nasdaq: GOOG), the No. 1 search engine and maker of Motorola phones, set an all-time record high of $700, slightly more than eight years after the Mountain View, Calif.’s initial public offering raised $1.67 billion.Reuters

Taiwanese PC and smartphone hardware maker Acer was reportedly forced to cancel the launch of its new smartphone two days ago after Google threatened to severe ties on Android, alleging that non-compatible versions of Android would result in the fragmentation of the operating system.

Acer was supposed to launch its new CloudMobile A800 smartphone, which is based on Aliyun 2.0, an operating system created by e-commerce giant, Alibaba Group on Thursday and had invited the media fraternity but was called off citing "internal reasons".

Google has now revealed that it was responsible for the cancellation of the smartphone release event.

"Compatibility is at the heart of the Android ecosystem and ensures a consistent experience for developers, manufacturers and consumers. Non-compatible versions of Android, like Aliyun, weaken the ecosystem. All members of the Open Handset Alliance have committed to building one Android platform and to not ship non-compatible Android devices. This does not however, keep OHA members from participating in competing ecosystems", Google told Ars Technica.

Android Chief Andy Rubin published a blog post after the Google's explanation for its extreme steps. Though his blog did not address this issue directly, he said OHA hopes to prevent the incompatibilities of different versions of Android.

"By joining the Open Handset Alliance, each member contributes to and builds one Android platform-not a bunch of incompatible versions." He wrote.

However, Alibaba claimed that the Aliyon OS is not part of the Android cloud. "Aliyun OS is not part of the Android ecosystem so of course Aliyun OS is not and does not have to be compatible with Android," it told The Wall Street Journal.

Alibaba group had earlier said in a statement that Acer was forced to cancel the unveiling of its smartphone by Google.

"Our partner received notification from Google that if the new product launch with Aliyun went ahead, Google would terminate Android product cooperation and related technical authorization with Acer," Alibaba Cloud Computing said in a statement.

Apparently, Google fears the popularity of Aliyun in China which is aiming to become the largest smartphone market in 2012. According to Google, the members of Open Handset Alliance (OHA), an association deliberated to promote Android members, has signed a "non-fragmentation agreement" in which Acer signed away rights to make other phones by joining Android alliance, reported Ars technica.

It is learnt that this is the first time the search giant has come out publicly to desist a threat coming towards it. The eyebrows are lifted even more when we think that Android is the most popular OS in the world. So what impairment could Aliyon cause to its market share?