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Facebook, Inc. Continues to Bet Big on Hardware

By Evan Niu, CFA - Sep 20, 2016 at 10:06AM

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The social network will eventually need more ways into your life.

Image source: Nascent Objects.

Just because Facebook (FB 3.86%) hasn't ever really had a hit hardware product (at least if you don't include the acquired Oculus Rift), that won't stop the company from trying. The social network has just acquired Nascent Objects, a small start-up that was working to create a modular consumer electronics platform. Nascent Objects also uses 3D printing to enable rapid prototyping of modular devices.

No financial terms were disclosed, but Nascent Objects will join Facebook's Building 8 division, the new hardware development lab run by Regina Dugan, who was poached from Alphabet's Google. Earlier this year, Facebook also hired away Rich Heley from an electric-car maker.

What's Zuckerberg cooking?

Building 8 was announced earlier this year, and Facebook has been playing this one close to the chest. Very little is known about what types of products the company is building, beyond the broad goal of making "new hardware products to advance our mission of connecting the world."

Hopefully, Facebook is acquiring Nascent Objects more as a way to accelerate its own development process while improving the efficiency of iteration, as opposed to looking to commercialize modular gadgets themselves. I'm optimistic considering Dugan's Facebook post announcing the deal noted, "Together, we hope to create hardware at a speed that's more like software."

The acquisition is somewhat similar to another one that Facebook has previously made: Parse in 2013. Parse offered a suite of development tools that enabled mobile app developers, while also providing a wide range of backend services that allowed them to focus on the app itself. Unfortunately, Facebook shut down Parse earlier this year, suggesting that the acquisition didn't play out as hoped. Larger peers provide similar offerings, and perhaps it wasn't worth competing.

This time around, instead of supporting and facilitating software developers, Facebook is looking to cater to hardware designers -- at least if Facebook maintains Nascent Object's current mission. But unless those newly designed gadgets help you interact with Facebook somehow, it's hard to see how this move makes sense, unless the company is looking to improve its own internal hardware development process.

It's not too hard to imagine Facebook trying to step into the physical world. With homes becoming more connected and virtual assistants becoming smarter (like the one that CEO Mark Zuckerberg just built in his spare time), the company will need a wider range of delivery mechanisms other than your phone.

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