Would Subdomains Be Treated as Folders By Google?

Barry Schwartz deliberates upon Matt Cutts's statement about subdomains being treated as subfolders by Google at Pubcon. He says that it can have consequences for companies and SEOs. Further, he talks about the applicability of such a change, he cites that if you search for Google on Google, "Google returns ten results from Google, nine of them from google.com and one from google.org. Here is what I see right now:www.google.com, video.google.com, maps.google.com, groups.google.com…" would the rule apply to Google as well?

He says "Right now it is all speculation on how exactly Google will handle these types of queries. But one thing I will bet on, if Google changes how they handle sub domains, I am sure SEOs will be buzzing about it the second it happens."

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