Facebook could buy Nokia to build 'FacePhone', expert claims

Existing hardware-operating system partnership between Nokia and Microsoft plays into Facebook's plans for a smartphone

While a potential Facebook smartphone was ridiculed by analysts, one Paris-based marketing expert predicted a "FacePhone" will happen in 18 months, and the social networking giant will buy Nokia for $10 billion to make it happen.

The existing hardware-operating system partnership between Nokia and Microsoft will also play into Facebook's plans for a smartphone, which mean the device would use the Windows Phone operating system, said Paul Amsellem, managing director of Mobile Network Group, a mobile marketing company.

"Facebook will launch the FacePhone and whether it has a blue color and a logo with a big "f" on it, it will definitely be disruptive," Amsellem said in a telephone interview. "Even at this moment, Facebook doesn't know what it will look like, but they need to do it."

Amsellem said Facebook, flush with cash from its recent IPO, could purchase Nokia for $10 billion, even though Nokia is valued at around $15 billion, with its stock price declining in recent weeks. Nokia is already producing Windows Phone models.

Microsoft already has ties to Facebook through a stock investment Microsoft made in Facebook in 2007 and collaboration by the two on Internet search to boost Microsoft's Bing search engine. The combination of all three companies could be powerful, he said.

If Facebook doesn't buy Nokia, it could buy BlackBerry maker Research In Motion, for less than $6 billion, to get access to BlackBerry Messenger compression software, Amsellem said. A primary reason to buy either Nokia or RIM would be access to their radio technology savvy and their connections to hundreds of wireless carriers globally -- areas where Facebook is notably weak.

"Facebook needs somebody with an understanding of networking, technology, carrier relationships and logistics," he said. "They can acquire one of these two players for not a lot of money."

Many experts have poo-poohed the idea that Facebook should build a smartphone, noting that the market is already crowded with the iPhone and various Android smartphones leading the way.

But Amsellem said Facebook desperately needs to "do something in mobile" to find a new technology sector where it can grow aside from its popular social networking software. Facebook has 900 million active users each month, with more than 500 million accessing Facebook from smartphones and tablets.

Facebook admitted in its IPO filing with the Securities and Exchange Commission that users' shifting from desktop and laptop computers to mobile devices were hurting its ability to sell advertisements, which aren't as predominant on the mobile platforms.

Rather than produce a "Buffy" code-named smartphone based on Android next year, as reported last November, Amsellem said Facebook has more time to bring a smartphone to market and to develop a strategy with Microsoft and Nokia. The New York Times recently reported that HTC is working with Facebook on a smartphone, even though they had previously worked together on a phone, called the ChaCha in the U.S. and Salsa elsewhere, that flopped.

Reports also surfaced that Facebook could buy Norwegian browser maker Opera Software. Last week, Facebook launched Camera, a mobile photo app, as part of a pending deal to buy photo-sharing app maker Instagram for $1 billion.

Google last week wrapped up a $12.5 billion deal to buy Motorola Mobility, giving the search engine giant a hardware manufacturing capability for its Android mobile operating system.

Facebook's interest in building a smartphone would allow Facebook to apply pressure on the rest of the market, including Google, Amsellem said.

But Amsellem's view is in the minority, with four analysts on Tuesday dismissing the Facephone idea. Rob Enderle, an analyst at Enderle Group, said Facebook would be starting off well behind Apple, Dell and Hewlett-Packard in building a smartphone, noting that the latter two basically failed.

"Facebook appears to be trying to emulate Google much like Google tried to emulate Apple," Enderle said. "A copy of a copy likely won't end up well, given how powerful both of the primary iOS and Android platforms are."

Enderle added: "We have a young company, Facebook, flush with cash, led by a young, inexperienced CEO, who treats this cash as if it were something he won in a game show. So I expect this to end badly."

Ramon Llamas, an analyst at IDC, added that the smartphone market is already "hugely crowded." A Facebook phone would offer little that's new to phone users or to mobile operators interested in finding new ways to raise data usage revenues. "Is anybody really turned on by having a Facebook phone?" he asked.

Ken Dulaney, an analyst at Gartner, added that instead of creating a smartphone, Facebook executives need to "get themselves ready to compete with Amazon, Apple, Google and others as an ecosystem before they start making phones ... It would be best to continue on with partnerships and being device agnostic"

Matt Hamblen covers mobile and wireless, smartphones and other handhelds, and wireless networking for Computerworld. Follow Matt on Twitter at @matthamblen or subscribe to Matt's RSS feed. His email address is mhamblen@computerworld.com.

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Matt Hamblen

Computerworld (US)
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