At a time when the smartphone business is brandishing iPhone glory and skyrocketing sales of Androids and Windows phones, Facebook may be planning to join the league in search of huge profits.
According to New York Times, the social media giant may launch its own smartphone by next year. The newspaper reported that half a dozen of ex-Apple engineers are working on Facebook's smartphone secret project and many among this team have hands-on experience on master projects of iPhone and iPad.
For the last two years, there have been rumors that Facebook, basically a software company, was trying to find a space in hardware business. Founder and CEO Mark Zuckerberg sensed that smartphone making, though incredibly complex, is a highly lucrative business. The company, which debuted on Nasdaq on May 18, is said to have tried earlier to launch a smartphone.
In 2010, there were reports that Facebook was seriously working on a smartphone project that later met with certain upsets. Later, there were talks about a tie-up with the Taiwanese smartphone manufacturer HTC to proceed on a secret project code-named 'Buffy'. Learning from the initial hiccups, Facebook reportedly recruited seasoned engineers from Apple and strengthened the core team for the smartphone.
Its own operating system and very popular web applications are among the advantages that Facebook holds in its foray into the smartphone business. The effectiveness of its messaging system, contacts, image and video facilities are proven. Recently, the company acquired Instagram, a very popular mobile image sharing system.
The initial public offering of Facebook created a hype in the market and it was able to list at the top end of its projected range. The successful, but bumpy IPO raised $16 billion, the largest ever for an internet company. Notwithstanding the IPO ballyhoo, Facebook shares have been on a downward spiral from the day of the debut.
Questions were raised about the revenue model of Facebook and the answers failed to convince. There was a sequential decline in revenue for the first quarter, which was attributed to seasonal trends and lower ad rates. General Motors' observation that advertising in Facebook had little impact on its sales was also a big blow, as the social media company draws the majority of its revenue from advertisements.
The weakness in revenue model really prompts Facebook to find a new source of income, and diversification seems to be the only way out. There is also a fear that Facebook would become stagnant as a mobile application for the mobile platforms if it is not finding new avenues.
With sufficient money in hand, Facebook can even think of a takeover of an established smartphone maker. Analysts say Blackberry-maker Research in Motion is likely to be a target.
Can Facebook pose a challenge to Apple in the smartphone market? Experts say no, instead, Facebook could irk Google that has launched its Android operating system that support popular smartphones.
FB finished Friday's regular trading session at $31.91, down $1.21 or 3.39 percent on a volume of 37.19 million shares.
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by RTT Staff Writer
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