Facebook, HTC Smartphone Partnership Rumors Persist

Facebook CEO Mark Zuckerberg says a Facebook smartphone doesn't make sense, but rumors of a partnership with HTC persist.

Despite denials from the founder and CEO of social networking behemoth Facebook Mark Zuckerberg that a Facebook-branded smartphone €œwouldn€™t make much sense€ for the company, a report in BloombergBusinessweek said Facebook and handset maker HTC are working together to produce a smartphone to hit the market in 2013.

The article, which quoted unnamed sources familiar with the matter, also said Facebook pushed back the launch to give HTC more time to develop the device, which would run a modified Android operating system, while a team of former Apple engineers has been put into place to improve the Facebook application on the iPhone.

Following Facebook€™s much-hyped initial public offering, which ended as somewhat of a flop, and the company's first quarterly earnings report this week, which assuaged nervous investors, the company is looking for new ways to drive revenue gains through advertising, and some analysts feel a Facebook mobile device with ads could be the answer. Facebook made $3.15 billion in advertising sales last year, but none of that came from ads on mobile phones, Bloomberg reported.

€œUsage is shifting to mobile, and they have not been able to monetize mobile,€ Victor Anthony, an analyst at Topeka Capital Markets, told the news service. €œTo the extent that it€™s a device you own and carry around with you at all times, and it ties into the Facebook experience, it will be beneficial. They could then put a lot of ads onto the platform.€

Facebook is the world€™s largest social networking site, claiming more than 900 million users€”half of whom use the platform on mobile devices. The company is currently in the midst of developing a more complete strategy to embrace mobile technology and serve a user base that is rapidly transitioning from desktops to mobile devices like smartphones, notebooks and tablets to use the site.

€œOur mobile strategy is simple: We think every mobile device is better if it is deeply social,€ the company said in a prepared statement. €œWe€™re working across the entire mobile industry with operators, hardware manufacturers, OS providers, and application developers to bring powerful social experiences to more people around the world.€

For HTC, which rebounded from its struggles in the two previous quarters to reclaim the No. 4 spot in worldwide smartphone vendor rankings, the partnership could represent an opportunity for the company to compete more vigorously with market leaders Samsung and Apple, which together dominate the smartphone space with almost half the market share. If the partnership turns out to be nothing but loose talk, HTC€™s streamlined portfolio means future share gains could rest on the success of its One line of products, according to a report this week from IT research firm IDC.