CNN Money has a solid piece which seeks to explain reasons why GOOG might be getting involved in the hardware business. Block quote below:
It’s simple: Google is seizing an opportunity to speed up innovation. “No one is going to be able to innovate as quickly as Google can with all these fantastic engineering resources they have plus lots of cash in the bank,” says Forrester Research’s Charles Golvin. “They’re doing this to light the way—to say, ‘here is everything Android can do.”
If GOOG can hasten society’s adoption of the smartphone while providing world-class hardware to run the Android platform, it’s a win/win for them regardless of the bottom line implications of the Nexus One itself.