The company will begin selling its first Linux-based phone, the A760, in the third quarter of this year. Furthermore, Motorola executives are betting that most of its mobile phone handsets in the future will be based on Linux.

At present, most so-called ‘smart phones’ are based on proprietary operating systems, particularly Symbian, a wireless software consortium of which Motorola is a member. Motorola declined to comment whether it would continue to support the UK-based Symbian initiative.

The announcement is also a blow to Microsoft, which has struggled to win acceptance for its own Smartphone 2002 operating system. Smartphone 2002 has been widely criticised for being bug-ridden and so far, the company has only a handful of small contract manufacturers as licensees. Orange is the only network operator that has adopted a Smartphone 2002-based product.

Microsoft also faces potentially damaging legal action by Sendo, a start-up mobile handset maker that claims that Microsoft stole its technology and passed it on to other licensees.

Motorola believes that by coupling Linux and Java, it will be able to tap into the vast developer communities for these technologies. That will enable it to come to market with products sooner. Furthermore, because Linux can be downloaded for free, it will allow Motorola to offer lower-cost phones to emerging markets, particularly in Asia.

However, despite the increasing acceptance of Linux as a server and desktop operating system, it is only likely to remain a small part of the overall mobile operating system market for some years to come, according to analysts at IDC.

They forecast that Symbian will enjoy a market share of 53% by 2006; Microsoft will occupy about 27% and Palm 10%. Linux is only likely to account for 4.2% of the market, according to IDC.