Can the Finnish fill the void left by Nokia?

Is Jolla Finland's new smartphone hope?
Is Jolla Finland's new smartphone hope?

Microsoft's acquisition of Nokia's devices unit has left a void in the Finnish smartphone market that other equipment makers are looking to exploit.

Start-up Jolla is one such company with around 90 percent of its workforce made up of ex-Nokia employees and an operating system (OS) for their new smartphone based on a version created by Nokia.

Nokia, which had second largest market share out of all the handset makers next to Samsung, agreed to sell in September its handset division to Microsoft in a 5.44 billion euro ($7.43 billion) deal. Under the Microsoft acquisition, what's left of the Finnish company is not allowed to re-enter the smartphone market until 2016 leaving a considerable void in the market, according to analysts.

"There is certainly a gap in the market. It is a place where Jolla can harness some of the creativity that was always there in Nokia but was hampered by the way Nokia was run," a telecoms and ICT analyst at Lewis Insight, told CNBC.

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"Probably 90 plus percent of our personnel are ex-Nokia people. And of course, we are inspired by Nokia and the thing (OS) we have, the Sailfish is based on MeeGo, which was developed by Nokia," Jolla CEO Tomi Pienimaki told CNBC.

"In that sense we are grateful for Nokia that they have developed the MeeGo asset which we are now utilizing ourselves."

Jolla's smartphone is expected to hit the shops before Christmas in Finland then roll out to Europe and the rest of the world. It will retail at around 400 euros ($547).

Pienimaki admitted that Jolla was not "aiming at a very big part of the market" but even a small share would mean "quite a lot of business" for the start-up.

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But some analysts warn that Jolla will not be able to take advantage of the Nokia-sized void and could get lost in the already saturated smartphone market.

"What a company needs to have is a very clear segment which is poorly served by the large handset makers. Jolla needs to find some niche. My fear is that their product is not targeted enough at the niche of the market it is still trying to be a general purpose smartphone," Ian Fogg, head of mobile analysis at IHS Electronics and Media, told CNBC.

"The challenge they face is that they are very small, they haven't got the budget or scale, and the OS they are using is used by almost no one else."

The controversy surrounding the 18.8 million pay-off to Nokia's former CEO Stephen Elop, who joined Nokia as part of the handset sale, has yet to die down in Finland. When asked on CNBC whether the Finns had forgiven the ex-CEO, Pienimaki said "As a Finnish person, I would say, probably not."

—By CNBC's Arjun Kharpal: Follow him on Twitter @ArjunKharpal