Most people have dismissed the once rumored phone as being the Google Android operating system, but word on the street is that Google has an actual piece of hardware is in the works. Apparently Google has an actual phone in the works.

And apparently the Google Phone will be even more exciting than the Motorola Droid, which is really saying something. Google won’t manufacture the handset, but will rely on a major mobile company while Google is in full control of design and specifications.

The secret to competing with the iPhone may just be a low price/low tech approach. Last week, Google acquired and got all social with the Finnish start-up Jaiku, holder of key Short Message Service patents. And though Google isn’t talking, we know they want advertisers to sponsor Google search results on mobile devices just like on Internet-connected PCs.

Jaiku is of course, key to their strategy. In addition, they also acquired the mobile social network Zingku and expanded “Google SMS,” which is a free service that sends answers to texters with questions.