The best estimates still only put production costs of an iPhone 3GS @ $178.96 1
The rumor isn't so crazy if you remember that google's most general mission is to get people online and using the web and looking at their ads.
You can guarantee that they know roughly how much ad revenue the average smart-phone using individual brings to them and therefore they could justify bringing a phone to market at cost or even below.
Remember when Google announced that they were starting a free email service with a ridiculously large 1 gigabyte disk quota for everybody? They announced it on April 1, and everybody assumed it was a particularly implausible joke. How we laughed! And then it turned out to be real.
Keep your skepticism shields up, of course, but this sounds like it could happen.
The rumor isn't so crazy if you remember that google's most general mission is to get people online and using the web and looking at their ads.
You can guarantee that they know roughly how much ad revenue the average smart-phone using individual brings to them and therefore they could justify bringing a phone to market at cost or even below.
1 http://gigaom.com/2009/12/09/who-is-getting-rich-off-the-iph...