Alibaba’s Operating System to Be Adopted by Five Handset Makers

Alibaba Group Holding Ltd. is working with five Chinese handset makers to use its operating system as the nation’s biggest e-commerce company competes with Google (GOOG) Inc. and Tencent Holdings Ltd. (700) for mobile device users.

The company, based in Hangzhou, will pay the handset makers a fee of 1 yuan (16 cents) a month for every phone they sell with the Alibaba Mobile Operating System, or AMOS, as long as the owner continues using the software, according to Alizila website, operated by Alibaba. It also will encourage developers to create apps for AMOS through a 1 billion-yuan fund using revenue sharing and other incentives.

Alibaba is expanding into mobile devices and cloud computing as more online shoppers order from smartphones and tablets. A Chinese government research institute said last month the nation’s smartphone makers are “heavily dependent” on Google’s Android software and that is hampering the development of the domestic industry.

“Alibaba is a potential competitor to Google to some extent,” said Duncan Clark, the Beijing-based chairman of BDA China Ltd., which advises technology companies. “The mobile operating system will give it a competitive advantage to defend its position.”

Tencent, Acer

The company’s billionaire founder, Jack Ma, said last month Alibaba may use acquisitions to boost growth through apps because it hasn’t been able to keep up with Tencent’s WeChat messaging service. WeChat had more than 300 million users by January.

China has more than 300 local Android-handset manufacturers, accounting for 97.7 percent of domestically produced smartphones, said a February report from the China Academy of Telecommunication Research.

Alibaba’s announcement comes seven months after Acer Inc. (2353) canceled a press conference to introduce a new smartphone using an older version of the software called Aliyun. The five new makers announced yesterday, with brand names including Konka and Zopo, will introduce six new handsets featuring AMOS, Alibaba said.

Haier Electronics Group Co. and Beijing Tianyu Communication Equipment Co. previously used AMOS software.

Alibaba also said it created a new sales channel for AMOS phones on Taobao Marketplace, its e-commerce platform that connects individual buyers and sellers.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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