Rumor: Is a true Google phone in the works?

According to finance and investment site TheStreet, Google is getting ready to dive into smartphones with a custom Android phone of its own, slated for this year. If this is true, not only would it be the search giant’s first direct entry into the wireless market, but the arrival of such a device would also turn the industry on its ear, says the site.

Why? Because the proposed phone would be an unlocked, low-cost, web-friendly Android handset sold strictly through retailers, not carriers, says Northeast Securities’ Ashok Kumar, an analyst who claims that Google’s "design partners" have looped him in on the plans. Apparently, the company doesn’t like how the wireless operators mess with handsets, revamping — even crippling — functions as they see fit. So it has pledged to offer open-standard mobile internet devices without carrier intervention, which would allow users to determine the functions. The phone is expected to use Qualcomm chips, though it’s not clear if it will be packing Qualcomm’s speedy Snapdragon processor.

TheStreet figures it could be a real game changer for the wireless smartphone market, since it would undercut Android offerings by Motorola, Samsung, Dell and the like. Motorola's whole comeback story is firmly rooted in Android, and Verizon’s been betting the farm on the Moto Droid handset, sub-brand and campaign. Dell also has an Android phone on tap, which is expected to launch early next year on AT&T.

It’s Coming to Market When?
For me, there was one bit in this story that particularly caught my eye: the Google phone’s ETA of this year. Well, the year’s mostly over. So how does it intend to finalize design plans and prototypes, manufacture, announce and launch the device? I mean, two months seems like a ridiculously short timeline, no? Experts cited in the article say that the company would probably go with a partner it’s already cozy with to accomplish this. HTC, for example, would be a good fit. It was the first to develop an Android handset, it’s familiar with Qualcomm chips and it could feasibly crank out the device fast.

Whenever it is that the handset may arrive, it would surely be taken as a slap in the face to the U.S. carriers that have been supporting and subsidizing Android phones, as well as the manufacturers.

Reactions to a True Google Phone
If the story pans out and the device takes off, handset makers may stop seeing Google (and its Android OS) as a teammate and more like a competitor. With so many makers hopping aboard the Android train these days, this move would seriously dampen that enthusiasm.

Our own Noah Kravitz, who met with Motorola and Verizon just last Wednesday, said the companies were proud of having worked hand in hand with Google to design the Droid. More over, they said Android 2.0 was optimized around Droid's hardware (and vice-versa). Should Google make the bold move of coming out with its own phone, you can bet that these guys and many others would be sorely ticked off.

This, actually, is the reason most of the players in the blogosphere think it’s absurd. They believe the company wouldn’t damage relationships with its supporters and evangelists this way. Others, however, think this isn’t too big of an issue, especially in light of Google’s true motivations.

So What is Google’s Goal?
There’s a theory that the company’s real endgame isn’t handset sales, but a more pervasive dominance in search (and ad sales). And the way to get there is to expand its reach beyond desktops to mobile users. That means that it needs to get its mobile OS into as many hands as possible. Liberating users from hefty carrier locks could yield the market share the company needs to accomplish its goals — even if it risks ticking off the rest of the industry.

You’ll notice a lot of words such as “likely,” “may,” and “maybe” thrown in here. The reason for that is — well, Google won’t confirm any of this. In fact, company reps have publicly called Kumar’s assertion a “market rumor” right now. What does that mean? No idea. If this is all fiction, then Google obviously wouldn’t confirm it. But if it’s an early leak on upcoming plans, the company still wouldn’t comment on it. So all that’s left to do is wait and see. Thankfully, it won’t be long.

What do you guys think? Is Kumar full of hot air or not? And if Google offers an unlocked Android phone, would you jump on it? Sound off below.

[via TheStreet, PC World, GigaOm]

UPDATE: CNET asked Google point blank today about the rumor. Andy Rubin, head of the company's Android development, replied thusly: "We're not making hardware," he said. "We're enabling other people to build hardware." 

...Google advocated the infamous hinge design on the G1 based on its desire to offer a phone with a five-row keyboard, Rubin said. That design was not popular with reviewers, however, and Rubin joked that perhaps that's why Google shouldn't make its own hardware.

But pushing for a design feature is a far cry from designing an entire phone, contracting with a manufacturing partner to build it, and working the distribution channels to get it to market. That would be "a fundamental shift" in Google's business model, Rubin said, and one the company does not seem prepared to make at this time. 

So there you have it. For more info, click here to see the story on CNet. 

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