Facebook is making a phone

By Brandon Griggs

A week after Facebook's bungled IPO comes fresh news to tantalize, or torment, the company's investors. The social-networking behemoth may be making a phone.

Facebook hopes to release its own smartphone by next year, according to a New York Times report quoting anonymous sources at the company and others who have been briefed on Facebook's plans. Facebook has already hired more than half a dozen former Apple engineers who worked on the iPhone, the report said.

We've heard this before. In 2010, TechCrunch reported that Facebook was building software for a phone and partnering with a third party to make the hardware. Citing their own sources, tech blog AllThingsD said last year the phone was code-named "Buffy" and would run on a version of Android modified to integrate Facebook's services.

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But Sunday's Times report added new specifics such as an interview with a former iPhone engineer who said he recently met with Facebook CEO Mark Zuckerberg, who "peppered him with questions about the inner workings of smartphones," including the types of chips used. "It did not sound like idle intellectual curiosity, the engineer said."

A Facebook spokesman declined to comment on the report Monday. The company had referred the New York Times to a previous statement that said in part, "We're working across the entire mobile industry; with operators, hardware manufacturers, OS providers, and application developers."

A Facebook-built smartphone could allow users to more seamlessly send messages, post updates and share photos or article links. Although it makes apps for iPhones and iPads, Facebook is still not integrated into Apple's mobile operating system, for example.

The news arrives amid speculation that Facebook, facing new pressure as a public company, will need to develop fresh sources of mobile revenue and exert greater control over its mobile products as users spend more time networking on phones or tablets instead of laptops or desktops.

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"Mark (Zuckerberg) is worried that if he doesn't create a mobile phone in the near future that Facebook will simply become an app on other mobile platforms," a Facebook employee told the New York Times.

It also comes days after rival Google closed its $12.9 billion acquisition of Motorola Mobility, a deal that could let Google make its own smartphone, too.

Many tech bloggers believe such a move would be a bad idea for Facebook, in part because there's no clear-cut consumer need for a Facebook phone.

Henry Blodget of Business Insider wrote that Facebook would face stiff competition in the hardware business, an area where it has no experience and where profit margins are historically low.

"So instead of building a phone, which seems like a desperate move, Facebook should partner with every operating system and carrier and hardware maker it can to try to embed this social platform within every mobile platform," Blodget said. "And it should build great apps to float on top of these systems."

In a post titled "It'll Be A Miracle If The Facebook Phone Doesn't Suck," TechCrunch's Alexia Tsotsis was more blunt.

"Making phone hardware is hard work, much harder than anything Facebook has ever attempted in the past," she wrote.

"Basically, there are a million ways this project will fail, and just one way it will work: Facebook ostensibly could succeed by tapping into the opening in the mobile market where people want an alternative to poorly designed Android phones ? targeting people who would buy something other than an iPhone if the price point was $150 less and the design were at least a little bit more ambitious than what is currently available on Android."