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As rumors swirl about Facebook’s (NASDAQ:FB) new smartphone in the works, a question arises: can a company whose DNA is software make the transition to building hardware? Few companies excel at both, though Apple (NASDAQ:AAPL) is a notable exception.
When Google (NASDAQ:GOOG) consummated its buyout of Motorola Mobility, it threw $12.5 billion into the ring betting it could also make its own smartphones in the future.
Facebook reportedly has been mulling its smartphone for a while now. And its new effort could be its third attempt. A previous shot at the project in 2010 failed to get off the floor due to the technical difficulties involved, according to TechCrunch. The second attempt involved a partnership with HTC to create a smartphone nicknamed “Buffy” – apparently this joint venture still survives.
Nevertheless, Facebook has been recruiting smartphone engineers, albeit on a low key and personal basis rather than through its jobs listing on the website. The group working on Buffy has also been expanded.
It is obvious that Facebook is under pressure to monetize its rising percentage of users that log in using mobile phones. Twitter has already managed to integrate itself into Apple’s iOS, but this may not be possible for Facebook, given its rocky relationship with Apple.
Facebook may be biting off more than it can chew. “Building isn’t something you can just jump into,” says Hugo Fiennes, a former Apple hardware manager for the first four iPhones. “You change the smallest thing on a smartphone and you can completely change how all the antennas work. You don’t learn this unless you’ve been doing it for a while. Going into the phone business is incredibly complex.”
Well, if all else fails, Facebook certainly has the wherewithal to go shop for one of many ailing smartphone makers. Beaten down BlackBerry maker Research in Motion (NASDAQ:RIMM) is cheap at a value of $6 billion, and could be just right for teaming up Facebook’s operating system with its smartphones.
Where would Facebook phones find a market? Most likely in the volume-based, lower-priced arena thronged by the pre-pay customers – ideal for an advertising thrust. This effectively means Apple has no fears of Facebook as a smartphone competitor, but Google may need to look out because that is exactly the segment its Android software dominates.
Investing Insights: Morning Action: Facebook Fumbles to New Lows, Chesapeake Surges.
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