If this latest intel is accurate, then Google may actually be subsidizing a large portion of the new Nexus 4 smartphone. In fact, they may be eating up to $380 dollars in costs to sell that device at such a low price point. Apparently, LG is selling the Nexus 4 to retailers in Europe for far more than what Google is selling it for on the Play Store. Here's a quote with some more detail,

Specifically, TheNextWeb found that LG (066570) is selling the Nexus 4 to retailers in Europe for €599 ($766), or €300 ($384) more than what Google is charging for the device on its Google Play store. 9to5Google says that it wouldn’t be surprised if Google is subsidizing the Nexus 4, saying that the device has a “seemingly impossible $299 price for the 8GB model” that includes “a beautiful 1280×768 IPS Retina-quality display, insanely fast Qualcomm s4 Krait chipset with 2GB of RAM, 8 megapixel cameras and beautiful design.”
It probably isn't surprising that Google might see this as an opportunity cost to help build up the Android ecosystem. The company is doing remarkably well and can easily afford this as a "psuedo-marketing" stunt. Ultimately, Google probably doesn't care if it makes money on the hardware, because its primary source of revenue is ad traffic anyway. This begs the question: is this a sustainable business model?

Source: BGR