Nokia Software Revived in Challenge to Android as Jolla Debuts

Jolla Oy, a Finnish smartphone maker founded by former Nokia Oyj (NOK1V) engineers, is stepping up its challenge to Apple Inc. (AAPL) and Google Inc. after the first batches of its handset were snapped up by consumers looking for change.

The company sold out the first production batches as customers preordered tens of thousands of its debut product, with the first 450 units being delivered to users at an event in Helsinki today.

Rather than trying to compete solely in the hardware business, Helsinki-based Jolla is seeking to take on systems such as Google’s Android in providing device manufacturers with software, for which profit margins are typically higher. Its first own device is intended as a reference product, to show what the company’s operating system is capable of.

“This is a product where our company can introduce our idealistic views on how we believe the mobile phone should be,” Antti Saarnio, Jolla’s chairman and co-founder, said in an interview. “On the business side, we’re dead serious. With our own phone and our partners’ phones combined, we’re expecting to sell millions of phones.”

The Jolla phone costs 399 euros ($543) without wireless-carrier subsidies. The price includes taxes in the European Union. The company received preorders from 136 countries and plans to start selling devices in the rest of Europe and China in 2014.

Gesture Controls

The phone uses an operating system called Sailfish, which is based on the MeeGo software that was abandoned by Nokia after its switch to Microsoft Corp. (MSFT)’s Windows Phone. Its touch screen looks different from those of Android and Apple devices, and functions are controlled in a unique way.

“We’ve made it very easy to move back and forth without having buttons,” Marc Dillon, another co-founder and head of Jolla’s software business, said in an interview. “There are really only two simple gestures: pushing from the edge of the screen and pushing from the center of the screen.”

To make sure users can access thousands of applications from the start, Jolla made the phone compatible with Android apps sold through Yandex NV, a Russian rival to Google. (GOOG) Still, winning software developers’ hearts and building up a competitive app assortment for Sailfish is a challenge, said Richard Windsor, an independent analyst at Radio Free Mobile.

“One of the bigger problems they’ve got is access to developers,” Windsor said. “They’ve implemented an emulator, which tricks” the apps “into thinking they’re running on an Android device. I have no idea how well it works. Historically emulators have been singularly awful.”

‘User Experience’

Jolla joins companies including Microsoft in trying to end the dominance of Google and Apple, whose operating systems ran 94 percent of the world’s smartphones in the third quarter, according to research firm IDC. Google provides Android to mobile-device manufacturers for free, while Apple uses its own iOS operating system in its iPhones and iPads.

“It seems unlikely” Jolla would sell “huge volumes,” said Windsor. “It’s a showpiece to show what the platform is capable of. The biggest thing that they’ve got is the user experience they’ve built, the interface.”

One of Jolla’s largest investors is Hong Kong-based Express Fortune, a unit of China Fortune Holdings Ltd., which bought a 6.25 percent stake of Jolla for 1 million euros on Feb. 18, partially related to an earlier convertible bond deal. Jolla’s founders own the majority of its shares.

Jolla plans expansion through potential e-commerce partners such as Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Baidu Inc., providing them with an operating system on which to build mobile versions of their e-commerce services.

“Sailfish is a platform other players can drop their services on,” Saarnio said. “That’s why we exist, basically.”

To contact the reporter on this story: Kasper Viita in Helsinki at kviita1@bloomberg.net

To contact the editor responsible for this story: Christian Wienberg at cwienberg@bloomberg.net

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