NEW YORK (
) -- Just as investors are clearly
, analysts are equally skeptical about the social networker's rumored plans to enter the smartphone market.
The New York Times
that Facebook is preparing to make a leap into the fiercely competitive smartphone market. Citing unnamed Facebook employees, engineers sought out by Facebook recruiters and people briefed on the company's plans, Facebook plans to release its smartphone by next year, according to the
Facebook declined to comment on this possibility when contacted by
, although analysts say that a smartphone move would be decidedly unwise.
"There's not really a lot of data points to support it," explained Matt Thornton, an analyst at Avian Securities. "The closest initiative was the Samsung Nexus with
, which did OK, but was not a full-on success."
Thornton notes that Facebook is not a mobile brand, making it even more difficult to break into the smartphone market. Furthermore, he explains, hardly anyone outside of
is enjoying success in the hardware business.
"It's a very difficult business," agrees Ron Gruia, an analyst at Frost & Sullivan. "There's so many handset manufacturers out there, it's hard to make an entry."
Last year, however, the
Web site reported that the Palo Alto, Calif.-based firm is working with
to build a smartphone code-named 'Buffy' running a tightly integrated Facebook service.
There has even been chatter that Facebook could buy HTC or beleaguered Canadian handset maker
Research in Motion
its fiscal first-quarter guidance on Tuesday, and hired bankers to help with its strategic review.
Facebook raised just over $16 billion in the
earlier this month, so cash is not an issue for Zuckerberg and his team. RIM, which saw its shares tumble almost 8% on Wednesday, has a market cap of $5.42 billion. HTC has a market cap of roughly $11.8 billion.
Thornton, however, warns that major smartphone M&A would be more trouble than it's worth for Facebook. 'It's a big chunk of change and your shareholders will be merciless if it doesn't go well." he said.
that Facebook is eyeing
and its Web browser, however, make much more sense, according to the analyst.
"If they want to have the Opera Web browser tightly integrated on an HTC phone, that would be an interesting way to tap this market," he said. "That way, you can dabble and see whether you really can differentiate."
Opera Software declined to comment when contacted by
Rather than leaping into the handset market, Facebook could pursue alternative revenue streams, says Frost & Sullivan's Gruia, such as licensing out an API
application programming interface to service providers.
"Service providers will want to pay to piggyback on the social network," he told
. "Facebook could charge
service providers a royalty for every time the API is invoked - that's one quick way for them to make some money."
Facebook shares slipped 1.98% to $28.27 on Wednesday.
>To follow the writer on Twitter, go to
>To submit a news tip, send an email to:
Check out our new tech blog,
. Follow TheStreet Tech