These rumours have been fuelled by a number of high-profile hires that Google has made, including various people who worked on Microsoft Internet Explorer, added to the fact that Google Inc. has registered the domain name gbrowser.com.
A Google spokesman refused to comment on reports surrounding the 'Google browser', but analysts believe they may have some substance.
James Governor, a principal analyst at Red Monk, said that he would be surprised if Google was not working on browser technologies. He does not think it will create a new proprietary browser. Instead, he expects Google to build on Mozilla, the open-source browser.
This potential strategy is supported by the fact that Google hosted the Mozilla Developer Day on its campus last month, where programmers worked on improvements to the browser.
Governor believes that there is plenty of room for innovation in the browser market, in particular as Microsoft has said that it will stop development of standalone versions of IE, and will instead evolve the browser as part of future updates to the Windows OS.
A potential area of innovation for Google could be the incorporation of offline storage into the browser. Google recently increased its offline storage know-how when it hired Adam Bosworth, who developed the Alchemy framework for BEA, a standard that enables offline storage for use with laptops and occasionally connected clients such as PDAs, iPods, and mobile phones.
Allen Weiner, a research director at Gartner, said that offline storage would only be useful if you could seamlessly move the information into productivity tools such as Word, PowerPoint and Microsoft Money. He added that Microsoft was in a better position than Google to develop such technology.
Overall, Weiner said that he did not think it would be a good idea for Google to create a browser as it would distract the company from its main business.
"Google's focus is as a search platform -- an information provider. They are not a software company," said Weiner.
Weiner believes there is no money to be made from a browser unless it offers a very big jump in functionality. He said another alternative browser is not needed and is unlikely to succeed given that other browsers have struggled to gain significant market share from Internet Explorer.
"There are already wonderful alternatives around such as Firefox and Opera, but they have only managed to get a small percentage of market share away from Microsoft."
Opera said it welcomed the news that Google is potentially entering the browser market.
Pal Hvistendahl, vice-president at browser firm Opera Software, said that he wants more competition in the browser space as it makes people aware that there is an alternative to Microsoft.
"Anything that makes people realise there is a choice out there is good," said Hvistendahl.
ZDNet UK's Ingrid Marson reported from London. For more coverage from ZDNet UK, click here.
Google most certainly is a software company, and I'm amazed that any analyst would release such a naive statement. For details, check this story and the one it links to towards the beginning:
http://www.kottke.org/04/04/google-operating-system