The iPhone was a poor device on day one. Limited to a poor carrier, it was a poor phone, with only a handful of built-in apps, no GPS, etc.

The Nexus One was a quite a nice device from day one, and in my opinion better than the iPhone 3GS.

But this is apples to oranges. The way a device is from day one is less relevant when the race is long. What was important in competing with Apple's first move was being first to a viable second place, which then iterates rapidly in a "aim, fire, ready" style. If Google had waited until they had a perfect second place, they'd still be starting with a tiny marketshare (hence lack of apps etc.), and perhaps Palm wouldn't have failed as it did. But Google didn't wait, and they're solidly in second place, and gaining.