According to Piper Jaffray analyst Gene Munster, Google isn't focused on making its own phone, but is interested in working with other phone makers like Apple. Munster says that Google is looking to build applications that could work with iPhone and other new smartphones. If true, this would be a good thing for Google, Apple, and advertisers.

"We spoke with one person with knowledge of the situation, and believe the SideKick hires were 5 to 10 people, with a focus on software," Munster said. "We believe Google is building mobile applications for search and location that will work with the iPhone, and other mobile phones."