Nokia readies Linux mobile OS for cheap smartphones

Nokia has underlined the importance of low-cost smartphones and now it appears that the company is developing a Linux-based OS for smartphones that will cost less than $100 (£60) without subsidies.

The new OS is codenamed "Meltemi," and the project is being led by Mary McDowell, Nokia's executive vice president in charge of mobile phones, according to sources familiar with the matter, claims to the Wall Street Journal.

The company has been hinting at plans for a reboot of its low end smartphone portfolio. At its Connection event in Singapore,  Nokia said that the cross-platform application framework Qt would be a good fit for lower-end devices.

McDowell said that Nokia needs to find a replacement for Series 40, according to Carolina Milanesi, research vice president at Gartner. "So if you put the two together, we can see where this would fit in," said Milanesi. Series 40 is the OS Nokia today uses on its feature phones, a product segment that is ramping down as users migrate to smartphones.

On the record, Nokia is keeping mum about its plans.

"Of course, we don't comment on future products or technologies. However, I can say that our Mobile Phones team has a number of exciting projects in the works that will help connect the next billion consumers to the Internet," a spokesman said.

Nokia choosing Windows Phone over Android has put the company in a tight spot when it comes to low end smartphones. There is no question that Android is pushing the price of smartphones to levels that are considerably lower than that of smartphones based on Windows Phone in the near-term, which means that Nokia has a gap in its portfolio, according to Ben Wood, director of research at CCS Insight.

"That means Nokia either needs to scale up Series 40 and make it a more robust competitor with a smart-like experience or look at alternative options, and [Meltemi] could be one of the other options," said Wood.

Nokia can't afford to bet its entire future on Windows Phone, and if it wants to remain the volume-selling leader it needs to step up its efforts in the low-end smartphone segment, he said.

The low-end smartphone market is increasingly important and will become the largest smartphone market segment, according to Francisco Jeronimo, research manager at IDC. Sales of less expensive smartphones are already growing faster that high-end models in Western Europe and the availability of low-end smartphones will be crucial to increase sales in emerging markets, he said.

The opportunity is so big that no one can afford to ignore it, not even Apple, Jeronimo said, adding that he won't be surprised if the company releases a cheaper version of the iPhone next week.

For Nokia, a logical venue for the public launch of Meltemi would be at Nokia World in London at the end of October. The drawback is that Meltemi risks being drowned by the expected launch of Nokia's first Windows Phone, according to Wood.