I would likely do the same thing if I had $25B in cash, was generating $9B more each year and had a legion of super talented engineers, but I wonder if Google is letting hubris get the best of them. As near as I can figure out, over the last month the company has opened, or deepened, competitive initiatives with Facebook (Google Buzz), Apple (Nexus One and HTML5), numbers telco providers (high speed internet initiative) and a sovereign nation of 1.3 billion people (China) not to mention the ongoing battles with Microsoft in search, although this remains a lopsided fight, and enterprise apps.
All of these initiatives, in true Google fashion, are innovative, disruptive, principled or all three combined. That said, the concern is one of focus. Yes the organization has tremendous talent and capital resources, but do all the new battlefronts suck up the company's management and engineering talent in a way that keeps them from innovating on the core driver of the operating cash flow mentioned above: traditional search and search advertising? Could this result over time in the equivalent of a Windows Vista search product that leaves them vulnerable to new competitors? In the end, I conclude it is unlikely, but how the company ensures it continues to invest in the core and manages its ever expanding initiatives and ambitions will be interesting to watch.