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Nokia Releases First Windows Phone 8 Phablet

Will Nokia become the dominant Windows mobile maker, or just a cautionary tale?

Nokia (NOK) has released the first Windows Phone 8 phablet, as well as its own Windows RT tablet. Given the path that Nokia is currently on to become a hardware division of Microsoft (MSFT) — as a high-profile acquisition supporting that company’s strategy to transform into a services and devices powerhouse — the tablet release in particular is a little odd.

The big screen smartphone will hep the Windows Phone 8 platform to be more competitive against Android, but runs the risk of further alienating Microsoft’s other hardware partners, notably Samsung (SSNLF) which has made a name for itself as a phablet pioneer on the Android side.

The Tablet

The new Windows RT-powered Lumia 2520 checks off all the boxes when it comes to specs, including a powerful quad-core Snapdragon processor from Qualcomm (QCOMM), a 10.1-inch HD display, optional cover with built-in keyboard and trackpad (along with an auxiliary battery) and double-digit battery life. It starts at $499, includes LTE wireless capability and takes design cues from Nokia’s Lumia smartphones with a glossy, colorful shell. Early reviews consider it a very attractive and well-designed tablet.

We’re heading into a holiday shopping season where tablets are going to be front and center in the competition for consumer dollars. Every major manufacturer has refreshed its products for the coming battle — including Apple, which wrapped up its iPad event earlier this week, revealing the new iPad Air. Microsoft also recently unveiled its own Surface 2 tablet (dropping the RT from the title), despite dismal sales of the original Surface RT.

But there’s a question lingering under all of this news. Product development has long cycles, and Nokia’s tablet has obviously been in the pipeline for a while. There’s an investment in R&D to be recouped and no better time for a sales pop than the holiday quarter. That being said, why gamble on releasing the tablet at all, given that Microsoft took a $900 million hit on its own version, and every other Windows RT vendor, from Dell (DELL) to Lenovo (LNVGY) has abandoned the platform? Especially when Microsoft has regrouped and is taking another crack at it — meaning you’ll be competing directly against the heavily promoted Surface for limited Windows RT tablet buyers.

The move is even more puzzling given the fact that, if the Nokia purchase goes through (which seems likely), there is almost zero chance that Microsoft will keep two separate Windows RT tablet lines. That fact alone has the potential to spook potential buyers who won’t want to end up with a discontinued tablet.

The Smartphone

One of the technical limitations of Windows Phone 8 was its lack of support for driving displays beyond 720p resolution. It made no sense for a smartphone manufacturer to put out a big-screen Windows Phone device given that limitation — the display would lack the sharpness consumers demand. HTC reportedly dropped plans for a big Windows smartphone last year for this reason. But with the release of Windows Phone Update 3, the platform now has the ability to drive big displays at full 1080p resolution.

A phablet was the unfilled niche in the Windows 8 platform.

The new Lumia 1520 looks like any of Nokia’s Lumia smartphones, only bigger — to the tune of a 6-inch display. That’s even bigger than Samsung’s new Galaxy Note 3 Android phablet, although the Lumia uses very similar internals. The $750 Lumia 1520 continues Nokia’s theme of power-user smartphone photo capabilities with a 20MP camera sensor, high-quality lens, optical image stabilization and a dual LED flash. If anyone was holding off on Windows Phone 8 because the platform lacked a phablet, that barrier is now gone.

Given that Nokia already dominates Windows Phone 8 sales and Microsoft’s move to buy the company’s hardware business is bound to mean a competitive advantage, this new Lumia isn’t going to thrill third-party OEMs, who were already wary of Windows Phone.

After unseating Nokia as the world’s biggest vendor of mobile devices and dominating the Android smartphone market, Samsung has made a name for itself as the king of the phablet, selling more than 40 million of its Galaxy Note line. With the release of Nokia’s Lumia 1520, I can’t see Samsung having any interest in taking advantage of the Windows Phone 8 upgrade to release its own big-screen Windows smartphone. I doubt HTC will revive its plans for one either — the company has its hands full right now without another distraction.

The Bottom Line

In the unlikely case that the Microsoft acquisition falls through, the releases put Nokia in a strong position to continue dominating the Windows Phone 8 platform and to take a serious chunk of the Windows RT platform market (such as it is). Otherwise, the Lumia 1520 smartphone serves as yet another reason for other Windows Phone 8 hardware partners to think twice about releasing new devices while the Lumia 2520 tablet is destined to either be discontinued or supplant Microsoft’s own Surface tablet in the Windows RT market.

As of this writing, Brad Moon did not hold a position in any of the aforementioned securities.

Article printed from InvestorPlace Media,

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