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As a company that has built a business model atop trust, Google is in a sticky position as it prepares to formally introduce the Nexus One phone.

Google's Nexus One phone could be a sea change in how Google works with Android partners who might turn into competitors.

(Credit: Cory O'Brien via Twitter)

Google employees were given free Nexus One phones at a company party Friday night, and the Internet went into a tizzy. Reports surfaced later in the weekend that this device was the long-awaited Google phone, the company's answer to Apple's strategy of controlling the hardware, software, and distribution model with the iPhone, rather than the partner-oriented strategy of developing the guts of the operating system and letting partners each put their own stamp on the finished product.

Just two months ago, Google's Andy Rubin rolled his eyes when asked about an analyst report picked up by TheStreet.com that said Google planned to pursue this exact strategy. He said Google had no plans to make its own hardware--which is one thing since smartphones are almost exclusively manufactured by contractors in China and Taiwan--but he took a further step in spending about 10 minutes arguing why it would be a bad idea for Google to design its own phone and sell it outside of carrier channels.

That line of thinking resonated with many who follow Google and the mobile industry. After all, Google's stated goal for Android ever since the project was revealed in November 2007 was to create an "ecosystem" of multiple phones that would help improve access to the mobile Internet. And Google seemed to finally reach that goal this year, with over a dozen phones in the wild and more promised from some of the world's leading phone makers and wireless carriers.

But if the reports are correct, Google is about to make a radical departure from that strategy. And Google's new course would take it down a path that could sow distrust among the company's Open Handset Alliance partners, who must now be wondering if they're about to get into a marketing war with one of the tech industry's richest companies.

Katie Watson, a Google representative, said on Sunday that the company has confirmed nothing about its plans for the Nexus One, described as a "dogfooding" experiment for internal testing by the company in a blog post Saturday.

In the rush to anoint the Nexus One as the Google Phone, it's quite possible that the tech industry glossed over the fact that Google already sells Android phones, albeit on a limited basis. For quite some time, registered Android developers have been able to buy completely unlocked versions of the G1 and the T-Mobile MyTouch3G (also known as the Google Ion) for $399.

Google does sell some phones, such as the Google Ion, but only to developers for Android testing purposes.

(Credit: Stephen Shankland/CNET)

So there is a solid chance that the Nexus One is merely the Android Dev Phone 3, following the Dev Phone 1 (G1) and Dev Phone 2 (MyTouch or Ion). Just this year, Google handed out Dev Phone 2 models branded as the Google Ion to attendees at Google I/O 2009, but if regular people want to buy that particular phone they have to get the MyTouch3G from T-Mobile with a two-year contract.

It does seem clear that Google has played the premier role in designing the software for the Nexus One. In the company's blog post over the weekend, it said "we recently came up with the concept of a mobile lab, which is a device that combines innovative hardware from a partner with software that runs on Android to experiment with new mobile features and capabilities, and we shared this device with Google employees across the globe."

But the key unconfirmed detail is how Google plans to sell this phone. According to The Wall Street Journal, Google plans to sell this phone unsubsidized on its own, with consumers able to choose a wireless service provider after the fact. However, according to corporate sibling Peter Kafka at All Things D's MediaMemo and Reuters, Google has plans to hook up with longtime mobile partner T-Mobile to help sell the Nexus One through Google's Web site for $199.

How will Google market this phone? Anyone with a television set has likely seen an ad over the last month for the Motorola Droid, an Android phone sold for Verizon's network that has been billed as one of the best Android phones to date. It was also the launch pad for a long-term pact between Google and Verizon that will supposedly produce a family of devices based on Android.

If Google plans to sell the Nexus One directly to consumers, will it insist upon using its brand as the lead brand, rather than the "With Google" branding found on the back of many Android phones? Will it blast the airwaves during the NFL playoffs in January to trumpet the arrival of the Nexus One, perhaps just in time for the Super Bowl? And how will that affect partners such as Motorola and Verizon that have sunk so much money into promoting the Droid, only to see rumors of a Google Phone leak out at the worst possible time: the height of the holiday shopping season?

This could be a very telling moment in Google's history. At the moment, Google's mobile division does not seem to be completely in control of the message it wants to send consumers, partners, and competitors.

If Google really does plan to sell the Nexus One directly to consumers and compete with its customers, it has chosen an interesting way to announce it to the world, keeping the Google Phone rumor mill alive for months while publicly denying such plans. Apple has employed such a marketing strategy for years, insisting on near-silence regarding future product plans but benefiting enormously from the frenzy of interest in every little morsel that mysteriously pops up regarding those plans.

However, Google is not Apple. Google public-relations representatives will sheepishly admit that they have little control over how Google rolls out its products: Google is a company run by engineers, and engineers push the button when the product is ready to ship.

But when you're working in an environment with multiple partners that have competing interests, any confusion over your future plans--especially plans that would appear to yank the floor away--can breed distrust among those partners. One of Google's largest problems right now is that it has built a business model geared around the notion that it can be trusted with almost unprecedented control over the flow of information across the globe, and any cracks in that wall of trust will be exploited by its enemies.

With the way details have trickled out about the Nexus One, Google has either alienated current and future Android partners by muscling in on their turf, or set up thousands of eager smartphone consumers looking for an open alternative to the iPhone for disappointment when they realize Google merely plans to sell an expensive unlocked phone to a limited audience, if at all.

After all, Google essentially declared in its blog post that employees are testing a product with "new mobile features and capabilities" that presumably can't be found on the current crop of phones. It's almost the same language Google used to introduce Chrome OS ("our attempt to re-think what operating systems should be") while insisting that it had no competitive reasons for introducing that Netbook operating system.

Few believed that line with Chrome OS, and fewer still will believe that Google is creating Android for the betterment of humanity if it really plans to sell its own phone.

The new Google phone makes an appearance on Twitter.

(Credit: Cory O'Brien via Twitter)

Updated at 5 p.m. PST with additional details and at 10 a.m. PST December 13 with photo of the phone.

A blog post from a Google executive on Saturday morning dropped hints that the company would release a Google Android phone of its own.

In the post, Mario Queiroz, a Google vice president of product management, said the company had developed a "mobile lab" device that "combines innovative hardware from a partner with software that runs on Android." According to Queiroz, Google has distributed the device to Google employees worldwide so that they could test the new technology and help improve it.

Quieroz's announcement came only a few hours after reported sightings of the device. CNET TV Associate Producer Jason Howell, who had a very brief hands-on with the gadget Friday night and first relayed the news on Twitter, confirms that the "mobile lab" device is an HTC phone running the Android 2.1 operating system.

"I knew it was an HTC device," Howell said. "It looked like the Touch, but was a lot thinner...it was a slick-looking thing and very nice." He also spotted a trackball and four standard Android menu controls, and he said the display was "supersharp" and rivaled that on the Motorola Droid.

Howell didn't get a chance to dig into the handset's specs or detail the changes from the 2.1 update, but he noticed animated wallpapers, slight visual enhancements to the user interface, and a camera on the rear face that resembles the HTC Touch Pro 2. Curiously, Howell said he didn't see any Google logo on the handset. TechCrunch published additional, though unconfirmed, details, including a Snapdragon processor, an OLED touch screen, and a voice-to-text feature, while TheUnlockr posted leaked photos.

According to The Wall Street Journal, the handset will be called the Nexus One. Although HTC made the hardware, the software and user interface is all Google, from the applications to the "look and feel of each screen."

The Journal also said Google will begin selling the device early next year, directly to consumers, thus bypassing the traditional carrier channel. As an unlocked GSM device, the Nexus One could be used with T-Mobile or AT&T, though it's unclear which carrier's 3G bands the handset will support. During his brief tour, Howell wasn't able to test the performance, but he said that the Nexus One he handled was running on an AT&T SIM card.

Reports that Google would release its own Android phone first appeared earlier this year. The move is significant, as it could pit Google against the carriers that it so far has used to distribute existing Android phones. Also, without a carrier contract and subsequent service rebates the Nexus One could cost a few hundred dollars. For those reasons, I was a little skeptical when I first heard the rumor, so count me wrong on this one.

In the battle of the open-source mobile platforms, developers have at least two choices: Google Android, which is open source but (relatively) closed development, or Symbian, which is open source...once it gets around to releasing the full source code.

Guess which one is winning?

You can't code me, but at least you can buy me.

(Credit: Google)

Gartner expects Android to become the second-most popular mobile platform within the next few years as it continues to gobble up Symbian's declining market share.

But why?

Symbian has been dismissive of Google Android, as well as smaller upstarts like the LiMo Foundation, arguing that the latter is overly focused on middleware for wireless operators and the former is fake open source with more hype than substance.

All of which might be true, but the reality is that it seems to be working for Android. Google has been signing new handset manufacturers at a frenetic pace, while Symbian has been holding steady with Nokia...and that's about it.

Despite Symbian announcing new handsets, Google is actually shipping Android. There's a big difference between marketing and reality. Google Android offers the latter.

For all the buzz that Android gets from developers, its success owes more to handset manufacturers than to open-source developers. Handset manufacturers and wireless carriers are hungry for alternatives to surging Apple and declining Microsoft. And while others may not be seeing source code in copious amounts, handset manufacturers are apparently getting their fill.

More than this, though, Google gives them a safe, consumer-friendly brand. Symbian does not.

This is the reason Google Android is winning. It's not about developers--at least, not yet. Neither Symbian nor Android really offers developers open communities and open code.

No, the difference today is brand. Google has it. Symbian does not, and that's despite decade-long dominance of the mobile market.

Symbian still has a ways to go. It has a weak user interface (UI) that is supposed to get better, but that describes much that is wrong with Symbian today. Everything (source code, revamped UI, and resumption of market dominance) is always spoken of in the future tense.

Meanwhile, Google Android rolls on--not because it out open-sources Symbian, but rather because it out-executes it.

Windows Mobile lost 28 percent of its smartphone market share between last year's third quarter and this year's third quarter, according to market researcher Gartner.

Figures released Thursday by Gartner show that Microsoft's mobile OS had 11 percent of the global smartphone market in Q3 2008. A year later, it had 7.9 percent. Meanwhile, the iPhone's share rose from 12.9 percent to 17.1 percent, and Research In Motion's share jumped from 16 percent to 20.8 percent.

Symbian's share fell from 49.7 percent to 44.6 percent over the same period--a 10 percent drop.

Read more of "Windows Mobile loses nearly a third of market share" at ZDNet UK.

(Credit: Marguerite Reardon/CNET)

Early indications suggest that the Motorola Droid could be the breakout hit phone of the holiday season.

You might not have guessed it from the lack of long lines this past weekend, but analysts believe that Verizon is seeing strong sales of the Motorola Droid. The device went on sale on Friday across the country. And unlike other big launches for phones such as Apple's iPhone or even the Palm Pre, retailers had plenty of devices in stock, and customers didn't have to stand in long lines to get their phones.

Neither Verizon nor Motorola is providing exact sales figures, but David Samberg, a spokesman for Verizon, said sales were very strong over the weekend, with a steady stream of customers Friday, Saturday, and Sunday. Store representatives in Manhattan confirmed this, with one sales associate telling me on Monday afternoon that there had been a steady stream of customers in the store all weekend and even through Monday.

Analysts also believe that the phone is selling well. Mark McKechnie, an analyst at Broadpoint AmTech, who covers Motorola, checked with a small sample of Verizon retailers around the country and said in a research note on Monday that he is encouraged by the anecdotal reports.

"While it is early, and the sample size is small, we are encouraged by our findings," he said.

McKechnie estimates that Verizon had about 200,000 phones in retail channels for the launch, with many stores in larger metropolitan markets, such as New York and Los Angeles, getting about 300 devices. Stores in cities such as San Francisco got more than a 100 devices, and retailers in smaller cities got between 25 and 40 devices each.

Locations were stocked well enough that there were no reports of any stores that were completely sold out. An employee at the Verizon Wireless store on West 34th Street in New York said his store had gotten about 500 Motorola Droids and HTC Android Eris phones for Friday. The store didn't sell out of either phone, but much of its stock is now gone.

That said, the store employee, who didn't want his name used, said his store did sell out of the $29.99 Droid docking station, which charges the device. As of Monday, the company still hadn't restocked its supply of that accessory.

McKechnie reported in his research note that the Droid outsold the HTC Eris, which also went on sale Friday. And checks with Verizon stores in Manhattan back up this claim. While there were plenty of customers looking at the HTC Android Eris in the Verizon stores I visited Monday afternoon, most people said they planned to buy the Droid. The main reasons were the device's higher-resolution screen, better camera, faster processor, and latest Android software.

Still, plenty of customers noted that they preferred the look of the HTC Eris over that of the Droid.

Verizon's marketing may also be paying off. Verizon is spending more money on the Droid advertising campaign than it has on any other device launch. At least one customer at the West 34th Street said Verizon's advertisements had convinced him to get the Droid instead of Apple's iPhone, which runs on AT&T's network.

"I was considering the iPhone," said Henry Goodison of the Bronx borough. "But I saw a commercial about AT&T's 3G coverage. It said, 'Here is AT&T's 3G coverage, and here is ours.' And I thought it would be better to have Verizon, if I travel to another state, where AT&T doesn't have 3G coverage."

AT&T is actually suing Verizon Wireless over this commercial, asserting that Verizon's advertisement is misleading consumers. Verizon dismisses this claim as untrue.

Big lines didn't form outside most Verizon Wireless stores the day the new Droid hit the market.

(Credit: Marguerite Reardon/CNET)

NEW YORK--The new Motorola Droid got a sleepy reception on Friday morning when it officially went on sale across the country in Verizon Wireless stores starting at 7 a.m. in some places.

From New York to San Francisco, most stores around the country had few if any lines when doors opened Friday morning. There was a handful of people waiting outside at the Verizon Wireless store on West 34th Street here in Manhattan. And about 20 people waited in line outside a store here on Sixth Avenue, as well as at one in Clifton, N.J., Verizon officials said.

CNET reporters in San Francisco reported they saw only about 15 customers lined up for the device before a Verizon Wireless store opened there Friday.

The scene was somewhat more lively last night, when Verizon Wireless opened its West 34th Street in New York City from midnight to 2 a.m. About 100 eager Droid customers were in line when the store opened last night. Verizon spokesman David Samberg said the company sold 85 Droids in the first 45 minutes the store was open on Thursday night.

But even though the Droid didn't stir enough enthusiasm to get people to stand outside on a cold November morning, there appeared to be a steady stream of customers in several Verizon Wireless stores. Many customers were interested in the Droid, while some were checking out the new HTC Android Eris, which also went on sale Friday.

Lines are overrated
Samberg said that a lack of a long line or shortage of devices is actually a good thing. And he urged people to not prejudge the phone's success on that alone.

NEW YORK--More than a hundred people were lined up at midnight outside a Verizon Wireless store in midtown Manhattan to be among the first people to buy the new Motorola Droid.

More than a hundred people showed up at a Verizon Wireless store in New York City at midnight to buy the new Motorola Droid Thursday night.

(Credit: Marguerite Reardon/CNET)

About 65 eager shoppers lined the south side of West 34th Street across from Macy's in Manhattan at 11:30 p.m. Thursday waiting for the store to open. Verizon opened the store from midnight to 2 a.m. to give people in the Big Apple a head start on the morning cell phone rush. By midnight, when the doors officially opened, about 100 people stood in line as Verizon officials ushered in customers 25 at a time.

Once inside the store, about 13 sales representatives and another four or five device specialists milled around, helping customers and demonstrating the phone's features. Representative were also helping customers transfer contacts to their new phone.

Verizon Wireless spokesman David Samberg said he felt confident that Verizon would be able to meet customer demand for the new Droid in New York City. The 34th Street store alone had at least 500 Droids as well as some HTC Android Eris phones, and Samberg said he expects anyone wanting to buy a Droid on Friday in New York City will be able to get one.

"Five hundred phones is a lot of phones to sell in one day," he said.

Most people standing in line for the new Motorola Droid are long time, loyal Verizon Wireless customers.

(Credit: Marguerite Reardon/CNET)

Most of the people standing in line at midnight for a Droid were loyal Verizon Wireless customers. Geoffrey Aravallis, who stopped to pick up his Droid on his way home from a dance club in the city, said he has been a Verizon Wireless customer for nine years.

He said he had been tempted to switch to AT&T for the iPhone but didn't because he felt Verizon has a better network than AT&T. Now that the Droid is out, he is glad he waited.

"I use Gmail and all kinds of Google services, so it's nice to be able to have all that on my phone," he said. "And the Droid is much more open than the iPhone."

Gabrielle Dahms admitted she had also been tempted to get the iPhone. But she had heard terrible things about AT&T's network and was leery about making the switch. Instead, she decided to wait for the Droid.

"It has all the features I like on the iPhone," she said. "Plus it has a real keyboard, which sold me."

Many people have been comparing the new Droid to the iPhone, and some have even called the new device the true iPhone killer. But judging from the people I talked with who were buying the Droid, it looks like it might be more of a BlackBerry killer.

Dahms and her boyfriend, Will Welch, had been BlackBerry Curve users. Welch said he had tried the BlackBerry Storm last year when it first came out, but he didn't like it. He also thought the iPhone was cool, but was unwilling to switch carriers for it. And he said he would have probably upgraded to the BlackBerry Tour if the Droid hadn't come along.

The Droid will hit store shelves nationally starting at 7 a.m. Friday in many stores around the country. CNET News will be covering the launch, so stay tuned for updates.

With the Moto Cliq, it matters what's inside.

(Credit: Motorola Cliq)

On Call runs every two weeks, alternating between answering reader questions and discussing hot topics in the cell phone world.

In the age of iPhone, Google Android, and Palm WebOS, a funny thing has happened on the way to the cell phone store. Though handset design has long been the focus of cell phone development, hardware manufacturers appear to be shifting their attention. Software is now taking center stage as companies struggle to distinguish their touch-screen devices from their competitors, and companies aren't being shy about this new focus.

The shift really hit home in September when we met with Motorola following the introduction of its Android-powered Cliq. As my colleague Tom Krazit wrote at the time, Moto CEO Sanjay Jha was clear that his company is resting its comeback attempt on its signature MotoBlur software. Jha characterized MotoBlur as more than software, but also as "emblematic of the shift towards software and the Internet as the main features in a modern mobile phone."

From a company that developed some of the most iconic cell phones in history (hello, Moto Razr and Startac), Jha's words were surprising. Software has always been a part of phones, but it has rarely defined them. Unless you were a smartphone buyer deciding between Windows Mobile and BlackBerry, most customers bought a phone and used the manufacturer's standard operating system without a thought. Sure, more savvy users had their strong preferences, and Verizon tried an abysmal standardized interface on its handsets, but elements like thin designs, colored faceplates, and messaging keyboards got the most attention.

MOUNTAIN VIEW, Calif.--Google's Andy Rubin, head of the company's Android development, would like to clear something up: Google is not in the phone-making business.

Don't expect to see Google-developed hardware competing with the Motorola Droid anytime soon.

(Credit: Motorola)

Last week TheStreet.com reported that Google had plans to sell a Google-developed phone at retail this year, bypassing carriers with its own Android implementation. But Rubin, vice president of engineering for Android at Google, scoffed at the notion that the company would "compete with its customers" by releasing its own phone.

"We're not making hardware," Rubin said. "We're enabling other people to build hardware."

Now, Google has played a role in designing phones that have emerged with Android, such as the G1. For example, 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.

Rumors of a so-called "Gphone" date back years, long before Google formally announced Android in November 2007. But Google's strategy to date has been a somewhat traditional volume licensing play, working with hardware and carrier partners to spread Android far and wide as the mobile operating system of choice, rather than following Apple's lead with a complete hardware and software design like the iPhone.

Almost two years later, the software is rounding into form with the release of several phones this year along with the pending release of the Motorola Droid, which runs Android 2.0 on Verizon's network.

Corrected at 5:50 p.m. PDT with Rubin's correct title.