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Why Google Won't Sell A gPhone

This was a rare week when a new rumor about the long-awaited gPhone from Google arriving ANY MOMENT NOW did not emerge. If I had a nickel for every time a blogger has announced that the prospective device has been "confirmed," I'd have a lotta nickels. So I'm going to go out on a limb and say: It ain't happening.

Oh, I'm not saying that the reports of the gPhone's development are false (note that the headline of this post says "Sell," not "Make"). I'm saying that with its $185.4 billion market cap, the search company is perfectly willing to pour millions into designing and stealth-marketing a device that may never hit the market. Why? To force the carriers and the handset vendors to play by Google rules.

In fact, the whole gPhone effort, at which I have no doubt dozens of Google elves are toiling away as I write this, may be a "wedge" tactic to force open carriers' networks and vendors' screens to the do-no-evil logo. Google wants real estate and eyeballs, not handset sales. Here are six reasons why Google won't go into the mobile phone business:

1. Google is a software-and-advertising company, not a hardware manufacturer. Even Apple, which has made its living on stylish consumer equipment for its 31 years, took many years and lots of dough to come up with the iPhone. Even then, it didn't exactly get it just right. Google has no established OEM partners, although it is said to be working with Taiwanese handset maker HTC on the gPhone. Making stuff people want to buy is hard. Just ask Sony.

2. The margins are low. Just ask Motorola's Ed Zander. Margins on Google ads are low, too, but the cost of putting them out on each additional page is virtually zero. Google CEO Eric Schmidt is very familiar with the realities of marketing and selling phones. It's not a business that he really wants to get into.

3. The competition is fierce. Nokia, Apple, Samsung, Sony Ericsson, Research in Motion, Motorola: that's a formidable list of new competitors, able to respond quickly to new trends and new devices (just look at the iPhone knockoffs now emerging). Each is a potential partner for Google's mobile ads and services. Schmidt won't anger them unless he has to.

4. No carrier will sell it. It would be entirely against the Google ethos to release a phone exclusively, locked to designated carriers' networks, but at present that's the only way to sell phones in any volume in this country. Google is busy striking partnerships with every carrier, domestic and international, it can entice to the table. Buying spectrum and putting out a cheap Google-branded phone isn't the way to get them there. Threatening to put out a phone may be.

5. It's not fun. Google already has been drawn into the telecom struggle over the upcoming FCC auction of valuable wireless spectrum in the 700 MHz band. Two years ago it opened a D.C. office with a genuine Capitol Hill lobbyist. Becoming a handset vendor would entail altering the company DNA even more. The example of Apple, for whom the iPhone has been a raging sales success but increasingly a PR nightmare, has to be evident to Schmidt and his team.

6. Google doesn't need to. Why take on the headaches of actually building and selling devices when the vaporware of the gPhone is already having the desired effect of forcing open carrier networks and greasing the skids for deals with the handset vendors? Let's put it this way: Google's share price is up almost 20% in the last six weeks alone. Do you really think this is a company being forced to undertake a major new venture that's outside its competencies and carriers substantial risks for shareholders?

I think not. A mobile operating system, running on a raft of handsets from a variety of vendors, is far more likely. OK, now you can tell me why I'm full of s**t.

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