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

New phone would run Windows Phone operating system

May 29, 2012 03:51 PM ET

Computerworld - While analysts ridicule the idea of a Facebook smartphone, one Paris-based marketing expert predicts that a "FacePhone" will appear in 18 months -- and that 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 means 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."

With Nokia's stock price declining in recent weeks, Amsellem said that Facebook, flush with cash from its recent IPO, could purchase Nokia for $10 billion, even though the Finland-based device maker is currently valued at around $15 billion. Nokia is already producing Windows Phone models, although they aren't selling well.

Microsoft already has ties to Facebook through a stock investment Microsoft made in the company in 2007 and through a collaboration between the two companies 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 expertise 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 pooh-poohed the idea that Facebook should build a smartphone, noting that the market is already crowded, with the iPhone and various Android devices leading the way.

But Amsellem said Facebook desperately needs to "do something in mobile" to find a new technology sector where it can grow. Facebook's social networking site has 900 million active users each month, and more than 500 million people access 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.

It was reported in November that Facebook might produce an Android-based smartphone code-named Buffy, but Amsellem said the company could take more time to bring a smartphone to market and to develop a strategy if it worked with Microsoft and Nokia. The New York Times recently reported that Facebook is working with HTC on a smartphone, even though the two companies had previously worked together on a phone that flopped. The erstwhile Facebook-HTC device was known as the ChaCha in the U.S. and as Salsa elsewhere.

Reports also surfaced saying 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 to complement its Android mobile operating system.

Facebook's interest in building a smartphone could put pressure on competitors in the Internet market, including Google, Amsellem said.

But Amsellem is in the minority in holding a positive outlook on the prospect of Facebook developing a smartphone. On Tuesday, four analysts dismissed the FacePhone idea. Rob Enderle, an analyst at Enderle Group, said Facebook would be starting off well behind companies such as Apple, Dell and Hewlett-Packard. And the latter two companies basically failed when they tried to build smartphones, he noted.

"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 individual users or to mobile operators interested in finding new ways to raise data usage revenue. "Is anybody really turned on by having a Facebook phone?" he asked.

Gartner analyst Ken Dulaney concurred. 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," he said. "It would be best to continue on with partnerships and being device-agnostic."

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

See more by Matt Hamblen on Computerworld.com.

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