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Dear Facebook: Please Don’t Make a Smartphone!

Back in July, my colleague, Louis Basenese, revealed a fatal flaw in Facebook’s business model. One that could put its upcoming IPO on shaky ground.

Well, the latest news is that Facebook plans to release its own Android smartphone built by HTC (Taiwan: 2498.TW) – a move that could put its foundation on more unstable ground than ever.

You see, rumors of a Facebook smartphone began cropping up last September. But now it seems to be official. And the project’s codename is Buffy… Yes, seriously.

So why would Facebook do this? That’s a good question. And since the company hasn’t said too much about this decision, it has a lot of people (including me) scratching their heads.

Why Buffy is Unnecessary

According to Business Insider, “The general thinking is that [Facebook] doesn’t want to lose access to its users when they go mobile.” But with 350 million consumers already tapping into the social network regularly on mobile devices, that doesn’t add up.

Plus, a spokesperson for Facebook tells All Things Digital that “our mobile strategy is simple: We think every mobile device is better if it is deeply social.”

Okay. But the fact that we can access apps like Facebook, Twitter, Foursquare, Google+ and Skype on existing smartphones proves that we don’t need Buffy to stay in the loop.

Heck, even if Facebook plans to take social integration to a new level – like making it easier to share photos and videos, or overhauling the contact list so you know exactly what everyone is up to on multiple social networks – it’s still not enough to convince most consumers to adopt a new operating system.

Last week, All Things Digital asked its readers if they’d be interested in purchasing Buffy once it hits the market.

More than 80% already give the phone a giant thumbs down. Around 10% say maybe. And only 7% said they were on board. Ouch!

But that’s still more than I would’ve expected. Especially considering the device could hit shelves without one of the most crucial components to a smartphone’s success: apps.

Kiss Goodbye to Half a Million Apps

Even though the smartphone will be based on the Android platform, All Things Digital believes that Facebook will tweak the operating system enough to compromise its access to certain Google services. Most notably – the Android Market.

Granted, Facebook is supporting HTML5 apps. Which is a good move, since HTML5 is bound to gain traction in the coming months. But don’t expect consumers to say goodbye to the 500,000-plus apps available on the Android Market just yet.

Third-party alternatives for Android apps, like the Amazon (Nasdaq: AMZN) Appstore, are always an option, too. But even that could be a problem. Because applications are geared toward Google’s (Nasdaq: GOOG) operating system – not Facebook’s altered version of Android.

Bottom line: Louis Basenese already predicts that the “coming Facebook IPO represents the greatest short-selling opportunity of our lifetimes.” So now might not be the best time for the company to jump headfirst into the smartphone race.

Facebook’s COO, Sheryl Sandberg, said it best last month: “There’s one thing that I think is most important to Facebook, which is that we are focused on doing one thing incredibly well. We only really want to do one thing. Connect the world.”

Maybe it’s time for Facebook to get back to focusing on “doing one thing.” And that thing certainly isn’t a smartphone.

Good investing,

Justin Fritz

Justin Fritz

, Executive Editor

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