Google in 2006 claimed creating it's own distro "would be kind of dumb"

Your Daily...: Google at work on desktop Linux: "Google at work on desktop Linux

Back in 2006 it was rumored that Google was planning to release an OS but the response to this was they use it internally and would never release it.

The news went like this:

Google has confirmed it is working on a desktop linux project called Goobuntu, but declined to supply further details, including what the project is for. http://www.theregister.co.uk/2006/01/31/google_goes_desktop_linux/

Google at work on desktop Linux
update:

Google only uses it on the premises
'It's awesome, but we're not going to be releasing it. Unless you work here it wouldn't work anyway. If you haven't tried ubuntu, you should, I have the regular one running on my laptop and it really is fantastic.'

Google Working on Desktop Linux"

http://slashdot.org/comments.pl?cid=14609148&sid=175746&tid=217