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While the transaction is widely seen as being positive for both Nokia and Trolltech, the truth is that the valuation is unimpressive and this spells bad news for the gamut of other companies competing in the mobile Linux OS space.

For reasons that continue to confound many, the market has become filled with numerous companies producing Linux OS solutions targeted at the mobile phone: each company hoping to bite at the heels of Microsoft, Symbian and proprietary OEM platforms, for morsels of the handset OS market. Companies such as Access, Purple Labs, Open Plug, A la Mobile, OpenMoko and Mizi Research have launched over the past couple years positioning their Linux-based solutions as alternatives to the 'closed' platforms like Windows Mobile and Symbian/S60.

As another provider of a Linux-based handset OS, Trolltech is something of an anomaly in the mobile industry because it is the only handset Linux OS vendor with customers, shipping products and revenues.

Trolltech was founded by Eirik Chambe-Eng and Haavard Nord in 1994 having started work developing the Qt platform in 1991. Through a mix of organic growth and VC investment, Trolltech has expanded to serve over 5,000 customers with its embedded Linux solutions and suite of development tools. The company has grown from less than 50 employees in 2000 to reach 250 by 2007. On the 5th July 2006, Trolltech raised NOK 125.3 million (about $20 million) when it listed on the Oslo Stock Exchange, valuing the company at about NOK 820 million.

Although Trolltech boasts an impressive base of customers, the vast majority are outside the handset market - for example, the company recently reported that it was strengthening its position in the Oil & Gas and Entertainment industries. The Norwegian company says it's working with over 100 manufacturers (mostly building music devices, VoIP phones and medical devices) while 40 are building phones. As of the end of 2006, Trolltech reported 11 mobile phone models and 30 embedded devices released running its Qt or Qtopia platform. In 2005, Otopia, Trolltech's product targeted at mobile devices, accounted for just 20% of revenues, although the company expected this to grow as aggressively as 100% year-on-year. However, in its most recent financial report, the company admitted that Qtopia sales were below expectations.

All this puts Trolltech's $150 million acquisition by Nokia in a somewhat different light. Nokia is paying NOK 843 million for Trolltech, valuing the company at almost exactly what it was worth when it IPO-ed almost two years ago. To be fair, the company was probably over-valued back in 2006, when the industry's love affair with handset operating systems had peaked, but it is telling that Nokia has not attributed much value to the revenue and product successes which Trolltech has experienced in the past two years. It is even more telling that Trolltech's management have accepted Nokia's cash, instead of holding out for an improved valuation were they confident that future market conditions would be favourable to the company.

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