Rumours, hints and leaks have all suggested that Google was working on a GPhone. Official confirmation comes from Isabel Aguilera, Google's chief executive in Spain and Portugal. The woman has admitted that the search giant is indeed working on a mobile phone in the labs but it isn't exactly as top priority as the iPhone was for Apple. She noted that it is just one of 18 R&D initiatives the company currently has underway and that it is probably for developing countries anyways. The idea is all about helping information get to where it's needed in developing economies. In the end, it isn't exactly something to get excited about, as the project can easily be dropped at any time. Nonethless, expect the Google Phone to be touted as the iPhone killer on your favourite "trusted" sources.
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