UPDATE 2-Alibaba launches smartphone running its Cloud OS

Thu Jul 28, 2011 1:03pm BST

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* Launches mobile operating system and smartphone

* Tablet using Alibaba's OS to launch in China this year

* Looks to diversify away from core business of e-commerce (Adds details, quotes)

By Terril Yue Jones

BEIJING, July 28 (Reuters) - Alibaba Group launched its first self-developed mobile operating system and smartphone on Thursday in a bid to capture a slice of China's rapidly growing mobile Internet market.

The cloud computing-based operating system, Aliyun, will run the K-Touch Cloud Smartphone, to be launched at the end of July in 10 colours, said Wang Jian, president of Alibaba Cloud Computing, a unit of Alibaba Group.

A tablet PC running the Aliyun OS, which is based on a customised Android system, will also be launched in China by the end of the year, Wang told reporters after a presentation in Beijing.

Handset manufacturer Tianyu will manufacture the K-Touch as well as the tablet, Wang said.

"Mobile users want a more open and convenient mobile OS, one that allows them to truly enjoy all that the Internet has to offer, right in the palm of their hand, and the cloud OS, with its use of cloud-based applications, will provide that," said

The Aliyun operating system will feature cloud services such as email, Internet search and support for web-based applications. Users will not be required to download or install applications onto their mobile devices, Wang said.

Alibaba Cloud plans to integrate the operating system with other devices including mobile phones with larger screens and tablet computers in the coming months.

Wang said the company was looking to launch tablet computers running Aliyun by the end of the year.

The company is currently in talks with Qualcomm Inc to develop a lower-end chipset optimised to run Aliyun OS in lower-end mobile phones, Wang said. The K-Touch phones use a high-end chipset from Nvidia Corp for crisp display of intricate games.

Alibaba Group, which is 40 percent owned by Yahoo Inc , operates China's largest B2B online marketplace, Alibaba.com , and China's largest online consumer shopping site, Taobao.com.

Wang said Alibaba does not have sales targets for the K-Touch. "We are not responsible for selling the phone; we just provide the system, so there is no hard number," he said, adding that within 15 minutes of the end of Thursday's presentation, Alibaba sold 1,000 of the phones on Taobao.

Alibaba will have an English-language version of the Aliyun OS ready by the end of this year, but Wang could not say when English versions of the phones and tablets might go on sale.

Nor will Alibaba get into the phone-manufacturing business, Wang said. "We shouldn't make a phone," he said. "We're not in that ecosystem, and it's a very good decision not to make a phone."

China, the world's largest mobile phone market, has nearly 907 million mobile subscribers, according to statistics provided by the three leading telcos in June.

The firm has been busy diversifying away from its core business of e-commerce into search, logistics and now mobile computing. Baidu , Alibaba's big Internet rival in China, has also been diversifying away from its core business of search into e-commerce and it has hinted that it is developing a mobile operating system as well. (Reporting by Terril Yue Jones; Writing by Melanie Lee; Editing by Jacqueline Wong and Will Waterman)

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