Nokia moves to realize Internet ambitions: Seeks $153M purchase of Trolltech for open-source, cross-platform expertise

Nokia Corp. said it would purchase Trolltech ASA, a Norwegian software company, for about $153 million, subject to approval by Trolltech’s stockholders.
Nokia appeared eager for the deal and Trolltech seemed amenable as the Finnish handset giant offered a 60% premium above Trolltech’s closing price Friday on the Oslo stock exchange. Nokia said it would acquire Trolltech’s employees, software assets and current platforms, including Qtopia and Qt.
Nokia’s stock remained relatively unchanged on the news.
Trolltech specializes in Linux-based, open-source, cross-platform software. Nokia’s purchase could further its ambitions to use its massive installed base of mobile phone users — it just reached 40% global market share — to offer a unified, Internet-based suite of services, one of which is Ovi, its recently announced multimedia and gaming service. Indeed, Nokia said as much in today’s announcement.
Porting Linux to S60
In the short-term, the Trolltech purchase will refresh the competitiveness of Nokia’s Series 60 smartphones and its Series 40 feature phones, the Finnish company said. Long-term, the deal will enhance and propel Nokia’s software strategy.
“Trolltech’s deep understanding of open-source software and its strong technology assets will enable both Nokia and others to innovate on our device platforms while reducing time-to-market,” said Kai Oistamo, an executive VP for devices at Nokia. “This acquisition will also further increase the competitiveness of S60 and S40 (devices).”
In a separate background statement on Nokia’s software strategy, the company said:
“We will grow the number of people using Nokia devices and transform (those) devices . with complete and compelling Internet capabilities.” In another software strategy statement, the company added: “Nokia sees the PC as an essential part of achieving seamless access to content.”
According to Ovum analyst Adam Leach, “Adding (Trolltech’s) Qt framework to S60 (for instance) . allows developers who have open-source applications targeted at Linux to run on S60-based devices, (increasing) the number of applications and services which can run on the devices.”
Moto, Google impacted
The acquisition leaves Motorola Inc. in “an awkward position,” Leach added. “(Motorola) recently announced that it would continue to use Qt as a basis for all its Linux devices. This leaves Motorola beholden to Nokia for a key part of its technology strategy.”
Nokia’s purchase of Trolltech, which is a member of the LiMo Foundation — one of several high-profile efforts to establish a global standard for Linux — could tip the balance toward LiMo’s efforts over Google Inc.’s Android project, according to Leach.
Nokia’s market position is virtually the opposite of Internet-giant Google, which recently unveiled its Android project, supported by the Open Handset Alliance. Android is another Linux-based, open-source effort to develop a global standard.
Google has compelling Internet search and mapping capabilities that serve an advertising-revenue model, but no homogeneous, installed base of handset users. Nokia sells nearly 400 million handsets each year, but has yet to realize its ambitions for profitable, Internet-based services that can be accessed via PC, mobile phones or other devices. Apple Inc., of course, has its own, closed ecosystem of devices and multimedia services.
More M&A expected
On the Nokia-Trolltech deal, analyst Craig Mathias at Farpoint Group, said:
“You can expect merger-and-acquisition activity in this area to heat up as software platforms assume a greater role as product and market differentiators.”
For analyst Ben Wood at Collins Consulting Services, the Trolltech deal is further evidence of a new Nokia on the move.
“We’ve now seen Nokia investing over $10 billion in acquisitions in the last 18 months,” Wood said via e-mail. “Historically, Nokia did not make acquisitions, preferring to develop things in-house. There is a clear change in strategy under CEO Olli-Pekka Kallasvuo. We believe that Nokia is accelerating its efforts in the software space to close the gap that opened as a result of the Apple iPhone launch. Although sales volumes of iPhones are merely background noise in the context of Nokia’s volumes, the iPhone’s impact on consumer expectations for a mobile phone, user-interface experience is immeasurable.
“Trolltech instantly beefs up Nokia’s in-house software capability and headcount in the areas of UI, cross-platform consistency, open-source and Linux.”