Focus On World-Changing Tech Could Drive Facebook Inc Stock

  • Facebook announced the opening of its first dedicated hardware development lab, dubbed Area 404.
  • The Area 404 lab will centralize the development of custom hardware solutions for data centers, AI, AR/VR, and Internet connectivity.
  • To continue its growth, Facebook needs to take direct control of mission critical hardware.

In April Amigobulls covered the announcement of Facebook's (NSDQ:FB) ten year roadmap, showing that the world's leading social network wants to be a leading technology company. The deployment roadmap for the first five years is focused on incremental enhancements of current products and services, but in parallel, Facebook's research and development arm will perfect next-generation products intended to boost Facebook's growth in the following five years, including advances in Artificial Intelligence (AI), Augmented and Virtual Reality (AR and VR), and extending Internet access to billions of people around the world.

It appears that Facebook is dead serious about the visionary part of its ten year roadmap. The company announced the opening of its first dedicated hardware development lab for new technologies that will significantly impact the future of the company - and the world.

"Today we opened the biggest and most advanced hardware lab in Facebook's history," said Facebook's creator and CEO Mark Zuckerberg. "Over the next 10 years, we're building everything from Oculus headsets to solar-powered planes. We've always had labs for each team, but our new lab will be a hub where engineers can work together to make even faster progress towards connecting the world."

The new lab - dubbed "Area 404" - will host dedicated hardware prototyping and development for next-generation products and services such as new hardware solutions for servers and data centers, the Big Sur open source hardware for large scale AI computing, the Telecom Infra Project (TIP) for ultrafast 5G wireless networks, as well as VR hardware and technology, including components for the Surround 360 camera for spherical video and Oculus Rift prototypes.

The Area 404 lab will also streamline the development of new hardware for Facebook's Internet connectivity projects, including Aquila, Facebook's solar-powered drone that will beam internet connectivity to remote parts of the world, Terragraph and Project ARIES (Antenna Radio Integration for Efficiency in Spectrum), two new terrestrial systems focused on improving the speed, efficiency, and quality of internet connectivity around the world, and a new optical detector that could simplify space laser communications and enable high-speed satellite connectivity in areas where traditional infrastructure is difficult to build.

Forbes notes that the Area 404 lab will speed up the process of creating prototypes and doing failure analysis from weeks to days or hours. "This lab allows us to do design, prototype, and testing in the one facility now, and that's a great asset for Facebook," Mikael Greaves, mechanical and power manager at Facebook, told CNBC. In fact, the scope and ambition of Facebook's roadmap implies that the company now needs integrated and streamlined in-house hardware development capabilities. Typically, software companies use commercial off-the-shelf hardware or, when they need custom hardware, they rely on the services of specialized external contractors, but Facebook is no longer a software-only company. Rather, Zuckerberg's company is transitioning to a multifaceted tech giant.

A few months ago Facebook created another research lab, dubbed Building 8, to develop hardware products and advance Facebook's strategic plan. Building 8, led by Regina Dugan, who most recently led the Google Advanced Technology and Projects group at Alphabet Inc-A (NSDQ:GOOGL), and before that was the Director of the Defense Advanced Research Projects Agency (DARPA), will operate in synergy with Area 404. Facebook says Building 8 is currently in the middle of hiring staff and will have access to Area 404, but will likely have its own equipment as well, CNN Money reports.

Some Facebook investors could feel uneasy with the company's push into new territories. But Facebook's executives seem persuaded that the company has grown as much as it could without taking direct control of mission critical hardware. For example, while Facebook's popularity in the developed world is really impressive and one has the impression that everyone is on Facebook, most people on the planet are not using Facebook - because they aren't online.

That's especially true in regions like Africa, where Internet connectivity via satellite or high-altitude drones is among the best available options. Therefore, Facebook's initiatives in bringing the Internet to everyone on the planet - connecting the world - make a lot of business sense. Similarly, Facebook's core social networking business needs AI and Machine Learning for improved search and automatic analysis of voice, images and video, and AI/ML need high-performance specialized hardware. Last but not least, many competitors are developing AR/VR interface hardware, and Facebook must keep improving its own products.

Therefore, Facebook's decision to bet on state-of-the-art in-house hardware development facilities seems based on sound business analysis, and investors should feel confident about the future performance of the Facebook stock.

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