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The Facebook Phone


This is either a Hail Mary or a terrible idea.

MINYANVILLE ORIGINAL After a year of rumors about Facebook (FB) building a phone, there appears to be proof that such a project is in the works. New York Times' Nick Bilton reported that Facebook has poached at least seven Apple (AAPL) engineers who have worked on either the iPhone or the iPad to design the hardware and software for a Facebook phone.

The New York Times quotes an anonymous Facebook employee who said, "Mark is worried that if he doesn't create a mobile phone in the near future.. Facebook will simply become an app on other mobile platforms."

Certainly, Facebook is aware it needs a mobile strategy. Its weakness in mobile computing is one of the factors that led Morgan Stanley (MS) analysts to downgrade revenue predictions for the company right before the IPO. "We are actively seeking to grow mobile usage, although such usage does not currently directly generate any meaningful revenue," the company said in its S-1 statement with the SEC.

Finding some way into our pockets was probably at least one reason behind the $1 billion Instagram acquisition. Facebook was born in the days of the browser, and that's where it makes money. The company hasn't yet figured out a way to get ads to fit somewhere on those tiny mobile screens. The absence of ads doesn't necessarily translate into a better user experience, however.

Somehow, Facebook saw all this as a sign that the company should make its own phone. The Times suggests that a Facebook smartphone can be on the market as early as next year.

There were reports this week that Facebook might buy Opera Software (OPESY.PK), the Norwegian makers of the Opera browser, which might be used on a Facebook phone. Opera gained 26% in Oslo on those reports.

The response from investors has been negative. Facebook stock has continued to decline over the past two days. The tech press is similarly flabbergasted.

Hardware design is nowhere near Facebook's expertise. By most estimates, it will take more than one year (plus the half a dozen Apple refugees) to get an entire smartphone to market.

Plenty of questions remain. Who will buy a Facebook phone? People usually only get one phone; you want that phone to be one that can do everything and have access to a diverse universe of apps. Can you use Twitter on it? How about Flickr (YHOO)? Or Google + (GOOG)? Or any other Facebook competitors? Will they get slammed with patent-trolling from every handset producer on the planet?

However, this isn't altogether unprecedented. Baidu (BIDU) has its own Android skin that integrates its services into the very soul of the phone. Amazon (AMZN) and Barnes & Noble (BKS) both turned themselves into electronics hardware companies with some success. The former forked Android to guarantee customer loyalty. Surely Mark Zuckerberg would like to keep us plugged in to his service as much as possible.

If you are a worried Facebook investor, take heed in Apple CEO Tim Cook's comments last night. AllThingsD's Walter Mossberg addressed the less-than-smooth Facebook integration on Apple products. Cook said that Apple and Facebook are working on that, and encouraged us to "stay tuned."

Facebook, love it or hate it, started out by offering a new service and growing into a major businesses with hundreds of employees. It changed all of our lives, and did so creatively. Poaching employees to make a defensive product that nobody seems to be clamoring for is the opposite of that.

Twitter: @vincent_trivett
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