Google has moved rapidly over the past year to extend its reach beyond text-based, pay-per-click Web search advertising into a variety of new markets, including online video, television, radio and print advertising.
Google has also expanded into enterprise software, which has traditionally been Microsoft's domain.
According the Wall Street Journal, the Google-powered phones are expected to meld several of its applications, including Google Maps, YouTube and Gmail.
The ground-breaking part of the plan, according to the newspaper, is Google's aim to make the phone's software "open," right down to the operating system which controls applications and interacts with hardware.
This will grant independent software developers access to the tools they need to build additional phone features, the Wall Street Journal said.