Linux storms mobile SW industry

Lucas van Grinsven

CANNES, France: The mobile phone business is looking more like the computer industry every day, with chip makers setting the pace of innovation and independent software vendors taking center stage, industry executives said.

There are, however, also major differences, one of which is that very few of the big names in the computer industry have yet been able to repeat their success in wireless communications, despite heavy investment made with their computer profits.

Intel and Microsoft, the behemoths of the PC industry, are still negligible players in the 684-million-units-a-year mobile phone market, holding market shares of less than 1 percent.

Another key difference is that the freely available Linux operating software is rapidly becoming popular on handsets, while its presence in personal computers remains modest, said industry executives in Cannes for 3GSM, the wireless industry trade show which opened on Monday.

Only two years ago Linux became the fourth independent handset operating software system to enter the fray after PalmSource, Symbian and Microsoft Windows, but its lower cost and few restrictions give it appeal.

U.S.-based Motorola, the world's second-biggest handset maker after Nokia, was the first major vendor to use Linux in a phone. It announced its first Linux phone at this same trade show two years ago, and uses a Linux distribution version from Norway-based Trolltech.

New models have since been introduced and Ron Garriques, the chief of Motorola's mobile phone division, said there are eight to 10 more in the pipeline. "And a significant portion of those will be launched this year," he said.

"Linux is open and it's free. In the end it's the only answer. For the mass, high volume market, I can't see another software platform," Garriques said.

MORE LINUX CUSTOMERS

Software company Trolltech's Chief Executive Haavard Nord, who is based at the Norwegian company's offices in Palo Alto, California, said he is now working with 20 handset vendors to develop Linux-based handsets, compared with just two, including Motorola, one year ago.

"Our goal is to be in 100 million phones in the year 2008, or 15 percent of the market," he said.

Trolltech and U.S.-based MontaVista Software are the two main players in Linux for mobile devices, and the two often collaborate.

The claim to fame for Linux is that it gives handset makers much greater freedom to tweak the software, because it is not owned by any one company. It is also much cheaper, going below $1 per phone if used in large volumes. Symbian charges $5 per handset if more than 2 million phones are shipped.

If a range of necessary software applications is added to the phone, such as a calendar, email, games and media players, the software bill per phone is $3 to $5 per Linux phone and $10 to $15 for smartphones running on Symbian or Microsoft, Nord said.

"Symbian and Microsoft have unrealistic ideas about what vendors can spend on software. We want to help drive software commoditisation. We're aiming to cut software cost to $2 to $3 per phone in a few years. We'll compensate for that lower price by bigger volumes," he said.

Smartphones and other advanced phones currently sell at premium prices of hundreds of euros. But prices are expected to come down as a result of cheaper components and fierce competition in the handset market.

With software prices from Symbian and Microsoft expected to remain stable, software licence payments will make up an ever larger part of the total cost of a handset. Something similar has happened in personal computers. The difference is that there is no dominant operating software vendor in the handset industry.

FRAGMENTED MARKET

Symbian had around 50 percent of the smartphone market in the second half of 2004, with Microsoft and PalmSource each taking 20 percent, according to market research group, Canalys.

Smartphones are just 4 percent of the total market, and while that is expected to grow to 16 percent in 2009 according to ARC research, Linux is really the only independent standard software alternative that can replace the bulk of proprietary and archaic software currently used in cheaper phones.

But Nokia's Vice President for Software Sales and Marketing, Antti Vasara, said the true cost of software is not just the licence per phone but also the development cost, and this was where Linux was still more expensive. "A lot of cost they forget to tell you about," he said.

Nokia has a vested interest to see Symbian succeed because it owns almost half of it, and its Series 60 set of applications for smartphones runs on it. But Vasara said Linux was challenging his company in a good way.

"They make good points. We're not complacent," he said.

Symbian separately said it could only maintain its high software licence prices if it has development tools that make it easy for handset makers to develop Symbian-based models.

Microsoft, meanwhile, said that its software offers unique value, which is worth the cost. "Our customers get access to a wide range of applications that run on Windows, also business applications. And we're finding that there is a lot of value in the familiar Windows user interface," said Windows Mobile marketing chief, Scott Horn.