Source news:
http://tech.blorge.com/Structure:%20/2007/03/24/google-says-outright-were-not-building-a-mobile-phone/

pointing to Bloomberg news http://www.bloomberg.com/apps/news?pid=20601087&sid=auF7zPU6Je7c&refer=home
including the interview of Mr. Alan Eustace, senior vice president of Google engineering and research.

Ah well, it would have been good.

Yeah, even with QWERTY keyboard included too.
http://blogoscoped.com/archive/2007-03-13-n23.html

from the bloomberg article:
<<Engineers at Google's Atlanta office work on projects including the Google Earth mapping program and a software tool kit for writing Internet applications.>>

what tool kit?

The Google Web Toolkit

http://code.google.com/webtoolkit/

This is NOT Google "saying outright" that they are not doing a mobile phone. This is Google saying that they ARE doing a mobile phone, by defining 'mobile phone' incredibly narrowly so that they can deny it for now.

This is like when Steve Jobs said Apple wasn't doing a video ipod, or when Google said they weren't interested in doing an office suite.

My prediction is that it's a Wi-Fi phone with integrated GPS, with a nice big display for showing all those local ads.

Yeah, it's Google Web Toolkit.