Why a Google Phone Wont Hurt the iPhone
"Clearly, this means enabling more mobile searches, but a 'Google phone' would also likely include tighter integration with Google Voice, GPS-enabled directions and mapping, location-based mobile advertising, Google Checkout (currently the only accepted payment platform in the Android apps market), and many other current and future Google services."By making and selling its own phone, Google would also be able to obviate the revenue sharing between Google and its carrier and OEM partners, keeping all of the sales earned from search and the handset. Google would also have better control over location-based advertising, audio ads delivered via Google Voice and other new revenue streams.
Of course, there are risks along with the benefits. For one, Google has never sold a mobile device, or hardware of any kind.
"We are not too concerned about increased competition in the smartphone market and the resulting impact on Apple as we view most of the new competing products coming out as 'kludge' devices which assemble separate pieces (e.g. hardware from MOT, software from GOOG, etc.) and attempt to make the pieces fit into a puzzle."