Why Google will make and sell its own phones

An interesting stat came out in the Oracle-Google trial today: in 2009 and 2010, Google's revenue from Android was far smaller than its internal projections.

The big reason for the shortfall was that direct to consumer (DTC) revenue was much smaller than expected -- $125 million short of expectations in the first five months of 2010, and an estimated $445 million short for the year.

Nexus One DTC sales were supposed to account for $561 million in revenue. But after Google changed course, it lowered its forecast to $115 million in revenue. Cancelling the DTC model also killed margins for Android. Google originally expected to lose $38 million on Android in 2010. After cancelling the DTC model, Google predicted it would lose $113 million. In other words, the failure of the Nexus One direct-to-consumer model cost Google almost $450 million in lost revenue and $75 million in lost profits.