Should Google Kill the Nexus One?

Google (s goog) this morning postponed the launch of two Android handsets in China in a clear indication that the company’s rift with Beijing threatens its booming mobile business. Meanwhile, the Nexus One has seen lackluster sales amid widespread complaints of technical glitches. So with Android’s future in China uncertain, and problems mounting with Google’s decision to build and sell the ideal Android phone — the Nexus One —  is it too early to wonder whether Google will pull the plug on its flagship phone?

Google indefinitely pushed back the launch of two handsets slated to debut tomorrow from China Unicom, dramatically upping the ante in its high-profile showdown with the Chinese government. As Om noted last week, China accounts for more 638 million wireless users, and handset sales are expected to grow by 21 percent this year alone. And the market could be especially ripe for Android given its support by some key players in the region: members of Google’s Open Handset Alliance include operators China Mobile and China Telecom as well as Huawei and ZTE.

While a governmental crackdown could lead to versions of the open-source OS that are far less integrated with Google’s mobile apps, the escalating conflict means that Google will be unable to control the evolution of Android in China. And it surely closes the door on any potential Chinese sales of the Nexus One — throwing yet another roadblock at the struggling handset.

Google appears to have overreached in launching its own branded handset. The search giant was clearly unprepared to deal with the customer service issues that inevitably arise in the retailing business, and splashy headlines of customer backlash are tarnishing its highly respected brand.

The company has obviously overestimated demand for an “official” Google phone, selling just 20,000 handsets in the first week it was out, and its strategy of competing against its handset and carrier partners has limited upside and risks losing the widespread support that has fueled Android’s growth. It may be unfair to predict doom for a handset that came to market just two weeks ago, but it’s becoming clear that taking on the role of mobile retailer was a mistake for Google. It’s too early to predict that Google will kill the Nexus One, but it’s not too early to wonder whether it should.