Rumors are flowing like water lately, and the latest one to grab everyone’s attention is a report that Facebook is supposedly working quietly on launching its own cell phone. In fact, the rumor goes that the project is so top secret that even the vast majority of employees don’t know it’s going on.

TechCrunch is reporting that a source familiar with the project has told them that two senior Facebook executives, Joe Hewitt and Matthew Papakipos, are both working on an operating system for a new cell phone. The new system would reportedly feature deep integration between the contact list and your Facebook account, but that would be sort of a given if the king of social networks is truly working on this project.  There is no word on what company would be building the hardware.

Facebook LogoBeyond those morsels, not a whole lot is known about what exactly is happening due to the extreme secrecy attached to the supposed project.

I have to admit I’m taking this story with a rather healthy serving of salt, and not just a grain.  The smartphone market is already so insanely overly populated that you would have to think a company insane to throw their hat into the ring at this point.  Supposedly Facebook is interested in this project due to the increasing power of the iPhone and Android platforms, but that doesn’t make a whole lot of sense to be honest.  Facebook is pretty deeply integrated into the Android system, and its app is one of the most popular for iPhones and iPod Touches (course, it’d be nice if they got off their duff and got an iPad app out.  Just sayin’.).  We’re not quite sure why mobile platforms would have the company so worried, but that’s what the supposed motivation is behind this project.

Of course, a major Web service releasing its own phone is not unprecedented, as evidenced by Google’s Nexus One handset, and we all now how well that went.  Where Google is succeeding is just supplying an operating system to device manufacturers, and if that is what Facebook is up to, it would make slightly more sense.  Hardware sales are a very different beast than just building the “engine” that runs the “car”.  If that is what the social network is looking to do, then yes, this indeed could turn into a very interesting little fight with Apple and Google.

Of course, Facebook did give a statement to Mashable that shoots down some of this:

The story, which originated in Techcrunch, is not accurate. Facebook is not building a phone. Our approach has always been to make phones and apps more social. Current projects include include [sic] everything from an HTML5 version of the site to apps on major platforms to full Connect support with SDKs to deeper integrations with some manufacturers.  Our view is that almost all experiences would be better if they were social, so integrating deeply into existing platforms and operating systems is a good way to enable this. For an example, check out Connect for iPhone and the integration we have with contact syncing through our iPhone app.  Another example is the INQ1 phone with Facebook integration (the first so-called ‘Facebook Phone’). The people mentioned in the story are working on these projects. The bottom line is that whenever we work on a deep integration, people want to call it a “Facebook Phone” because that’s such an attractive soundbite, but building phones is just not what we do.

While it does address the physical handset portion of the rumor, notice the wording doesn’t totally rule out an operating system.

What say you?  Do you think Facebook would ever jump into the smartphone game?