Jolla – Rogue wave.

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The sailors at Jolla may be better off selling their boat.

• Jolla, the creator of the Sailfish OS for mobile devices has filed to restructure its debts as it has been unable to close its latest $10.6m financing round.
• This has resulted in 50% of its staff being temporarily laid off effectively suspending development of the OS until another solution can be found.
• Jolla has been engaged in trying to licence the Sailfish OS as an alternative to Android, but has only met with limited success.
• Indian handset maker Intex signed up in July with the intention to release devices this year, but of these there is no sign.
• I suspect that Intex has found it more difficult and more expensive than expected to get a device to market, which combined with the debt restructuring, casts serious question marks over this relationship.
• The irony is that although Google’s growth has made it very difficult to convince anyone to buy an alternative, the time has never been better.
• Google’s ecosystem is under siege on all fronts (see here) and its inability to distribute updates to its software severely hampers its ability to improve its user experience.
• Furthermore, the Amazon App Store is getting better and better at replicating what Google Play has to offer and so there is less reason for a device maker to be forced down the Google ecosystem route.
• Despite this, it is increasingly difficult to convince anyone that Google’s position is more vulnerable than it was 12 months ago.
• What Jolla needs is a partner that needs an alternative to Google and one that is willing to commit its ecosystem to the Sailfish OS.
• Consequently, I think that Baidu and Tencent must be its best chance of salvation but I suspect that they will want to acquire the company.
• Alibaba is increasingly committed to its own in-house version of Android (Yun OS) but Baidu and Tencent appear yet to have made a commitment one way or the other.
• Both Baidu and Tencent are large enough to have the scale to warrant an in-house development which is why I suspect that they would prefer to buy rather than licence.
• This would also give them the ability to ensure that the software is developed exactly to their specifications which is becoming an increasingly important factor in differentiating and delivering a good user experience.
• Jolla’s difficulties also raises questions around the viability of Cyanogen which is in a very similar line of business.
• The one difference is that Cyanogen is based on Android making it an easier sell and the company also has the benefit of having raised $85m in March 2015.
• However, Cyanogen’s business model is to take a revenue share of the services that it enables with its software which I think could very easily come unstuck.
• Despite this, the latest funding gives Cyanogen time to work out where it fits in the mobile ecosystem which is something that Jolla does not have.
• Consequently, I suspect that Jolla well end up being acquired because despite its issues, the Sailfish OS provides an excellent starting point for the creation of an ecosystem.