Note: this article is based on an email response to Josh's article, in which I made some comments skeptical of the wisdom of GOOG's potential jump into the cell phone hardware business.  In light of Google's release of the Nexus One phone, I pondered the decision a bit more...

One of the things that turns me off about the iPhone is how much stuff ISN'T free, yet STILL advertises to you.  In that sense, I can see the Googlization of cell phones as a great direction for consumers.  i.e. if you'll put up with modest ads, then you can get cool stuff for free.

But outside of defensive marketing vs iPhone, I still don't see the wisdom in delving into such a low-margin (potentially negative margin) business. On top of that, there are already a bunch of phones that have  "with Google" (whatever that means) in their ads, which is like free advertising without the headache associated with hardware, and I wonder if those partners will get pissed that GOOG is now competing with them.  I mean, I get it -- it's exactly what many software companies have done with appliances with great success -- but they usually do it because it makes the software easier to set up and because they can get away with charging a significant software premium on the hardware and maintenance, and I don't see GOOG having the need to do either.  The GOOG brand is already pristine, so I don't see them needing to take on the risk of a bad rep borne of HTC's support problems, just for the sake of promotion.

 As I implied in my comment, GOOG mgmt seems to do no wrong, so there has got to be a good explanation for this.  I suspect maybe they are building a network of voice users, because they know it is much easier to disrupt an established industry with externalities already in effect.  Then, even with only 50,000 or so "early adopters" they could probably launch something in conjunction with their various other technologies (like Grand Central aka Google Voice) that would stab all their cell service partners in the back and allow people to use their phones without cell service, thus replacing land lines, cell phones, even broadband, etc.  Maybe a WiMax acquisition or expansion  is on the horizon, so they can provide seamless coverage?  I feel like there's got to be something bigger here -- something much more forward thinking than a successful company whimsically diversifying into a "me too" market.

That it looks like said whimsical maneuver -- or skepticism that they can succeed in upending the telecom market --  is the reason Wall St is yawning in response to this.  If there truly is some evil genius behind it, then look out.