Google HQ in the States have not confirmed or denied the rumours.
"Mobile is an important area for Google," Google spokeswoman Erin Fors said "We remain focused on creating applications and establishing and growing partnerships with industry leaders to develop innovative services for users worldwide. However, we have nothing further to announce."
But Richard Windsor, a phone analyst with brokerage Nomura in London, told clients late last week that unspecified Google representatives at CeBIT had confirmed the company is working on its own phone device.
"Google has come out of the closet at the CeBIT trade fair admitting that it is working on a mobile phone of its own," Windsor said in a note entitled "Google Phone: From myth to reality."
Curiouser and curiouser.