In my mind, there's never been any question that this was the purpose of Android; aside from the goal of spreading low-cost mobile computing, the business purpose was to avoid a market in which one company (known for their control freak tendencies) had utter control over the mobile OS market, in a much more locked-down manner than was the case with Windows on desktop. This would be a disaster for Google (and arguably, the consumer), as they'd have no market power (and the switching cost for a search engine is much lower than the switching cost for a smartphone). The introduction of Android was simply to ensure more competition in the market (in fact, back when Android phones had a hardware search button, you could find many phones that mapped it to Bing). Android was less about making money off the product directly than about shaping the environment of the mobile industry in a manner that was less unfavorable to Google.
As another example of this strategy, see Chrome: Performance of the dominant browsers was hindering what Google could do with their products...until an alternative was launched and both Firefox and IE magically decided that performance gains were possible, and now the state of the browser market is in much better shape than it was.
It's more than a little shocking that so few people seem to understand these concepts. You still see articles (whether from Wall St or the online tech community) about how Android makes X dollars in revenue, as measured in AdMob revenue from Android phones and Google Play revenue. This is then directly compared to the estimated cost Google has put into developing it and judged to be a failure, from a business perspective.