It's fair to say that things hang in the balance for Nokia right now, having bet the farm on Microsoft and Windows Phone 8. Microsoft is large and diverse enough to survive another flop, Nokia most likely is not. Nokia's flagship Lumia 920 smartphone has met with promising reviews – the company is claiming the lion's share of the Windows Phone space and turning a profit. But even with such success it will struggle to claw back ground against Apple and the Android army.
This year the mobile device war seems to be approaching a technological singularity, with the battle lines drawn around overgrown smartphones and pint-sized tablets. Last year saw Apple release the 7-inch iPad mini to address the threat from Asus' Nexus 7. Now there's talk of Apple releasing a 5-inch phablet to counter Samsung's Galaxy Note 2. A phablet seems an unlikely move for Apple, although anything is possible in the post-Jobs era after the backflip on a 7-inch iPad.
If Nokia wants to capture headlines in 2013, in order to be more than the big fish in the small Windows Phone pond it should look to an aggressive tablet or phablet strategy and build on its Lumia branding and technical expertise. Now is the time to seize the initiative rather than simply playing catch-up by churning out more 4-inch smartphones.
The original release of Windows Phone 7 saw pundits ponder whether it might ever be scaled up to a 7-inch tablet. While this could produce a slick device, it's an unlikely scenario considering Microsoft's tight control over the Windows Phone ecosystem. Hardware restrictions were eased somewhat with Windows Phone 8, but it's unlikely that Microsoft would permit Windows Phone 8 to be sold on a 7-inch tablet. It's also unlikely that Nokia would rock the boat, as Microsoft is clearly wearing the pants in their so-called strategic alliance.
Even if Nokia stretched the Lumia as far as a 5-inch phablet, it wouldn't make the same kind of impact as a 7-inch tablet. For all the hype, phablets are a fad which will never gain the mainstream appeal of a 7-inch tablet. In motoring parlance, phablets will turn out to be the cumbersome minivans of mobile devices: practical for a few people, but shunned by everyone else.
A more fruitful strategy for Nokia would be to produce a slick, 7-inch Windows tablet based on the Lumia design and branding. Microsoft's 10.6-inch Surface tablet received mixed reviews, mostly due to the limitations of Windows RT. It's a stripped-down version of Windows 8 which features the touch-friendly Modern user interface and the traditional desktop, but it doesn't let users install third-party desktop software. Such limitations saw many dismiss the Surface as a poor man's notebook, because Windows RT offers more than an iPad but less than a PC. A 7-inch tablet running Windows RT might be judged on its merits rather than dismissed out of hand as a wannabe notebook. All eyes are now on the Surface Pro running a full version of Windows 8.
Rumours of a 7-inch Nokia tablet abound and Nokia chief executive Stephen Elop did nothing to quash them during his recent Australian trip, stating that Nokia was looking to "broaden out the portfolio" and affirming his own personal preference for the 7-inch form factor. He's also said previously that Nokia is closely following the fortunes of Microsoft's Surface tablets.
Nokia lost 12 months when it switched to Windows Phone, extending Apple and Android's already considerable lead. Joining the Android army might have been a bad move, but now Nokia can't afford to drag its feet in the Windows tablet space. Especially when it's not the only Microsoft partner with its eye on the prize. HTC is the hot favourite to release the first 7-inch Windows RT tablet and it's possible we could hear more at Mobile World Congress later this month.
As the other key Windows Phone 8 partner, HTC presents one of the biggest threats to Nokia's plans for Windows mobile domination. Of course once you get into Windows tablet territory you also need to keep an eye on the likes of Asus and Samsung, which have 7-inch Android offerings and are also in the Windows RT tablet space (as are Dell and Lenovo). Should a few of these contenders beat Elop to the punch with a 7-inch Windows RT tablet, Nokia's hopes of making a splash with a Lumia tablet could be lost in the wave of new devices.
Of course, the problem with this strategy is that many hardware partners are already declaring Windows RT a disappointment. So far Acer has shunned Windows RT in favour of full Windows 8 tablets. Samsung, HP and Toshiba have all downscaled their Windows RT plans. Even if the jury is still out on Windows RT, Nokia can't afford to wait for a verdict if it wants to stay in the game. It needs to choose a tablet platform and take the plunge.
Of the many words used to describe Nokia of late, "nimble" is not one of them. Its strategic alliance with Microsoft could turn out to be more of a hindrance than a help. Rather than consolidate its position in the mature smartphone market, Nokia needs to seize the initiative and grab a slice of the growing 7-inch tablet market. Beating HTC and others to the shelves with an aggressively priced 7-inch Windows RT or Windows 8 tablet is the shot in the arm Nokia needs.
If Nokia can offer a slick ecosystem, the halo effect could even see a succesful 7-inch Lumia tablet drive sales of the Lumia 920 smartphone. Or Elop could put all his efforts into the Lumia 930 handset and hope for the best.