As this tablet is to hit the market before other Win8 tablets are launched by the OEM licensees, it would suggest that Microsoft aims to showcase the full capabilities and benefits of Win8 on a tablet device (available as both ARM-based and Intel x86 processor technology versions) and has therefore decided to take responsibility for the hardware. This will put it in direct competition with other OEMs wishing to launch Win8 tablets, but is similar in some ways to when Google launched its own-brand Nexus smartphones to showcase the benefits of Android, albeit that the software was “free”. By taking this approach, Microsoft needs to make sure it hits the market running as it is essential the tablet is properly marketed and shows its full potential if it has any hope of displacing Apple’s iPad in certain segments.

In terms of market potential, if Microsoft can convince consumers, enterprise and OEM partners alike of its value proposition then it should do well. Specific pricing was not mentioned in the release (although the ARM-based tablet will be cheaper than the Intel version) but this will be vital to market acceptance as will screen size, memory and applications – all of these are important points of differentiation in the tablet space. Surprisingly, the Surface will be larger and heavier than the iPad with a 10.6 inch display, which may not differentiate it enough from the Apple product. However, Microsoft has included a built-in kickstand, Touch Cover peripheral for keyboard and trackpad, magnesium casing and a pen accessory to create points of differentiation, although some of these have up until now had varying levels of success in the tablet market. Of these, the Touch Cover could prove successful as the keyboard and trackpad feature is missing from Apple’s smart cover.

Tablets have been finding their way into the enterprise, despite being mainly classed as consumption rather than productivity devices, and it will be interesting to see if a Microsoft tablet changes that perception. If it has the requisite Windows office applications available from launch – across both device types and suitable peripherals to make input easier – at a price point that is competitive, then I do see it displacing notebooks and netbooks in the office. However, there may be a problem with fragmentation owing to ARM-based and Intel-based versions of the same Win8 tablets, and possible differences once other vendors launch products, which may stymie the market in a way that has caused Android to suffer to some extent. However, this may be addressed in future Windows releases that pull together full support for the enterprise and are also optimized for touch and gesture control.

ZTE ushers in new Era

ZTE hopes to help pave the way to becoming third largest handset vendor by 2015 with an array of eight new devices launched at MWC 2012. Although a global aspiration, the new devices will mainly target users in Europe, Japan, the USA and China.

Leading the way for ZTE is the Era, an Android 4.0 (Ice Cream Sandwich) smartphone dubbed as “one of the thinnest quad-core smartphones on the market today”. The ZTE Era handset packs high definition multimedia capabilities with a 4.3 inch QHD screen. Further announcements on Android include the Kis and Acqua models with 3.5-inch and 4.0-inch screens respectively, providing additional price-points on Android 2.3 and the ZTE Blade II with an upgraded 1.0GHz processor. ZTE also announced the ZTE PF112 with a 4.5-inch high density (HD) screen, and 7-inch and 10.1-inch quad-core tablets for the European market. In tandem with the device launches is the first appearance of the ZTE MiFavor UI smartphone user interface for Android.

Available sometime in 2Q12, ZTE also announced its second Windows Phone 7 smartphone, the ZTE Orbit which has HD Voice and a 5Mpx autofocus camera with LED flash. The ZTE Orbit follows the ZTE Tania running Windows Phone, which launched in the UK in January and is shipping in the next few weeks.

ZTE has already gone some way towards its dream of breaking the top 3 as the company’s terminal shipments grew by 50% in 2011 and achieved a 400% increase in smartphone shipments, albeit from a small base, worldwide. This new, wide range of devices and user features should help the company drive that momentum, notably in the mid- to high-end, into 2012 and beyond. Led by the ZTE Era, this latest device line-up destined for major global markets across price tiers will lead to a new era for ZTE branded devices with every chance that the 2015 goal may come earlier than the company thinks.

To reiterate their Sony-ness, the portfolio offers a nod to its Bravia TVs with classic design and a translucent stripe at the bottom of the device whilst differentiating its offering utilising its heritage in music and cameras. To enhance the latter, Sony has added a white pixel to image capture on the XPERIA S device, called White Magic, which makes photos much crisper and clearer reducing the reliance on back-lighting while significantly reducing overall power consumption of the display.

All the new devices come equipped with NFC and to help connectivity across mobile devices and in the home the company has also launched “smart-tags”. Based on NFC and offered in packs of 3, users can set-up profiles via the smartphone for individual smart-tags depending on a requirement, such as connectivity in-car or with a music system. These take a shortcut to the benefits of near-field connectivity, offering a much more practical and easier proposition to the end user.

The company has stated that it sold “well over 1 million” Lumia devices, but this would have disappointed bearing in mind the impressive demand experienced during the first days of launch back in October. This early promise obviously never really materialized for the remainder of the quarter, which is a key time of year for all handset vendors. In tandem, the company’s Symbian smartphone sales are suffering as the trend towards lower-priced smartphones on the Android platform is taking hold and quickly eroding Symbian’s volume. Nokia must hope that its price-competitive Asha range of S40 devices can help stem some of this tide in a number of markets owing to the selection of on-board apps that these devices have, giving some element of “smartness”. With the average selling price (ASP) for smart devices also on the wane – down nine per cent year-on-year – the company needs to quickly rebalance its portfolio in the sector and find volume for its “hero” devices if it is to remain a key player in this highly competitive market.

However, Nokia can claim limited success in its mobile phone business, notably dual-SIM handsets in emerging markets, but again ASP has fallen by 24 per cent for the quarter year-on-year. The company still leads the market in terms of volume in the non-smart segment, with a solid array of available handsets, but it is quite clear that margin and profit are becoming key indicators in the market rather than purely volume, which is ripe for attack by the growing strength of the cost-conscious Chinese vendors.

Moving forward, the company hopes to it can crack the North American market with its Lumia devices – notably the flagship Nokia Lumia 900 LTE smartphone with AT&T, designed specifically for the North American market. While the device has already won awards and has beaten Apple’s iPhone and BlackBerry to market with LTE (but not Android), it remains to be seen whether the device has a strong enough pull to attract the hordes of AT&T subscribers that are already attached to the Apple brand.

Nokia needs to extend the Lumia range across price tiers and move quickly to other mobile operators and markets if it is to achieve critical mass for the devices, notably breaking China, as its smartphone volumes are clearly reliant on Lumia starting to plug the gap left by declining Symbian sales.

Using the strap-line “The Amazing Every Day”, Nokia has leaned heavily on music, navigation and sports as points of differentiation for its WP devices, creating some interesting partnerships along the way. Also, by suggesting the devices are “Easier, Faster, Funner”, Nokia is clearly pushing the consumer towards ease of use and entertainment on a platform that has struggled to make any headway into the smartphone mindshare, let alone market share, and one for which it has a heritage in productivity tools and enterprise.

This will be Nokia’s biggest challenge – convincing users that WP is a viable platform and it also has the requisite ecosystem to back up the claim. To help in this respect, Nokia announced a wide-ranging advertising campaign, from in-store marketing to flash-mob-style street advertising. This is a must if the company is to educate users about the WP platform and re-stimulate awareness of the Nokia and Microsoft brands in the smartphone space.

While the launch, due next month, is available initially in six European countries, with more countries around the world, including India, expected to received the devices before the end of the year, a key omission is their availability in the North America market until 2012. Both Nokia and Microsoft have struggled to break into the NA market in the past and waiting until late1Q12-2Q12 to launch a Nokia WP product, probably an LTE/CDMA version, seems a massive oversight. Jo Harlow, EVP Smart Devices, stated that the company wanted to enter the US in a “relevant” way, but at a time when mobile operators are waiting anxiously for the “third horse” to enter the smartphone fray, surely by seeding the latest Lumia offerings into the market would have made sense particularly in the lead-up to the Xmas holiday period?

Either way, if Nokia can get its sales and marketing effort right, creating an enticing value proposition to the customer built on the availability of its impressive devices – coined as the “first real Windows phones” by Stephen Elop, CEO – and showcasing the WP ecosystem, then I’d expect the new devices to sell well in the coming months. There’s no doubt that Nokia has always created desirable products but if the tie-up with Microsoft is to be its final attack on the smartphone market then today it has gone some way to extinguishing its burning platform and laying the foundations for another.

“We have seen a huge explosion in the tablet market in recent years, driven primarily by the iPad, and we estimate that the market will go from strength to strength, growing from under 20 million tablets sold in 2010, to over 230 million in 2015,” comments David McQueen, principal analyst at Informa Telecoms & Media. “We expect Apple to retain its leading market share until 2015 but only just. From 2013, as cheaper and more advanced Android tablets enter the market, we forecast that sales will pick up considerably, eventually surpassing iPad sales in 2016.”

Apple currently has 75% of the market but this will drop to just 39% in 2015. Meanwhile Android will see a huge increase in its market share, as the devices and the ecosystem around the platform improve. By 2015, it will have 38% market share, putting it on a par with the iPad.

“Three factors have proven to be decisive in the success and failure of tablets: brand; access to distribution channels; and product quality, including the application environment offered.  At the moment, the iPad leads in all three areas but Apple’s edge is likely to wane as the quality of the competing products and application environments improves,” adds McQueen.

It is anticipated that, once Windows 8.0 is launched, there will be a variety of tablets available in the market based on Intel and ARM architecture. These are most likely to include a Nokia device as well as a number from the traditional PC vendors.

RIM’s PlayBook is expected to show only modest growth early on following its launch as some mobile operators have shown to be reticent to carry the device as they are struggling with the business model owing to it initially being Wi-Fi only. However, volumes will be buoyed by the inclusion of Android apps on the device and the introduction of cellular connectivity (HSPA+ and LTE versions are expected before end-2011).

“Most mobile operators are expected to focus on supporting iOS and Android tablets in line with demand, and their current indifferent support for Windows, BlackBerry OS (QnX), WebOS and MeeGo tablets will prove decisive in shaping consumers’ purchasing decisions in the short term. However, it is those devices that can also dominate the consumer-electronics sector and online retail channels as well as nurture their current partnerships with the mobile operators that will win out,” concludes McQueen.

“Mobility is a key area for Accenture,” said Marty Cole, chief executive, Accenture Communications and High Tech group. “This collaboration with Nokia will enhance our ability to help clients across multiple industries leverage mobility to advance their business agendas. It is a real win-win for Accenture and Nokia”.

The deal not only sees Accenture increase its foothold in mobile services but also sees Symbian re-united with David Wood, its co-founder and now Embedded Mobile Industry Advisor at Accenture. Accenture and Nokia have been working together since 1994 and in October 2009 Accenture acquired Nokia’s professional services unit, which served as a key building block in Accenture’s Mobility Services portfolio.

For Nokia, the deal will enable the Finnish vendor to focus closely on future smartphone development, namely integrating Windows Phone with its hardware, rather than be encumbered by the outgoing Symbian platform. Nokia does, however, have an ongoing commitment to Symbian and plans to sell 150 million Symbian devices in the future, assuming it is able to maintain the platform’s viability during the transition to Windows Phone. Jo Harlow, Nokia’s executive vice president for Smart Devices, said: “As we move our primary smartphone platform to Windows Phone, this transition of skilled talent to Accenture shows our commitment to provide our Symbian employees with potential new career opportunities.”

The companies expect completion of the final agreement during summer 2011 and the transition of employees by the end of the year. The Accenture deal forms part of a wider Nokia plan to reduce operating expenses for devices and services by €1 billion (US$1.5 billion) in 2013 compared with 2010. In addition, Nokia also plans to reduce its global workforce by about 4,000 employees by the end of 2012, with the majority of reductions in Denmark, Finland and the UK.

The desire for Nokia to outsource software activities and cut costs is a clear indication of the company’s new-found focus. “At Nokia, we have new clarity around our path forward, which is focused on our leadership across smart devices, mobile phones and future disruptions,” said Stephen Elop, Nokia president and CEO. Nokia hired Elop from Microsoft in 2010 and this year he announced that Nokia is pinning its smartphone hopes on Windows Phone as its primary platform to compete more effectively against Apple iOS and Android.

Now that Nokia has outsourced Symbian and sold off the commercial licensing and services business of Qt, a cross-platform application and UI framework, it will be able to operate in a far more platform-agnostic mode in future. Ridding itself of these burdens will allow the company to be far more pragmatic in its future choice of platforms, enabling it to react faster to market demands, although at the cost of losing some element of control and internal expertise. This still leaves Nokia with the MeeGo software platform it developed with Intel in its portfolio, so is it a question of when, rather than why, will it go the same way as Symbian? If this outcome were to materialize, Nokia will have managed to outsource the majority of its software business to focus primarily on hardware, sending the Finnish company back to its roots as a very successful handset design house, which is arguably what it does best.

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There is no question that this partnership will provide scale for Microsoft which has been struggling in the mobile world since the beginning and will offer more competition, which will benefit operators (more options in terms of platforms).

However, this may not be the best move for Nokia and it is questionable how “open” Microsoft will be to work with. Even if Nokia fears Google’s dominance, an open platform like Android would allow much more possibilities to Nokia.

Also, two losers don’t make a winner, particularly given their scale and cultural differences. It’s hard enough for massive companies to innovate on their own much less with another massive partner with a completely different culture. Whether Steve Ballmer and Elop can be the white knights that the operators are looking for will depend largely on the ability for Nokia and Microsoft to execute their partnership effectively.

Implications for Operators:
The corridors of power within the operator community will be echoing to the cries of “at last”. Vodafone, Telefonica, Deutsche Telekom and many other operator peers had all been waiting for a credible challenge to the apparent hegemony of Google and Apple in the smartphone space. They’ll be especially pleased by both the reference to the importance of operator billing in driving uptake of applications downloads as well as the promise of a new force in the enterprise device and services space to reduce dependency on RIM’s dominant Blackberry platform. What is more, the more competition there is in the smartphone space, the greater the innovation, the better the devices that emerge and therefore the easier it is for operators to convert users to upgrading to dataplans. But while operators might view the MS-Nokia tie up as a net positive, ultimately it will be users who choose what phones they want to buy. That’s why we have to expect Nokia and Microsoft to match their bold move by making bold marketing investments to fund sell-through efforts via the operators’ retail channels.

Implications for Devices:
Whilst Windows Phone 7 will offer Nokia access to MS software expertise and help it crack the US market, however the problem with Windows Phone 7 is that it currently commands high build costs so will only compete at the top end of the smartphone market. This will put pressure on the Symbian and Meego platforms until such time as cost and prices has been driven down to complete with the likes of Android in lower smartphone tiers, a key segment for Nokia. The transition from Symbian to Microsoft will take time, and in this fast-moving sector of the handsets market, time is a scarce commodity.

Nokia software has a different DNA to Windows Phone: ditching existing software based on open-source to adopt a closed environment such as Windows phone means completely changing Nokia software DNA and this is not going to happen overnight. Drilling out cost and ramping volume to create a buoyant profitable ecosystem may take time, and Nokia scale will help MS to bring prices down although Android managed to do it in just over a year.

Implications for Platforms:
The decision not to go with Android is an interesting one, with Elop citing the platform as being too commoditised/ democratised and difficult to create differentiation and good margins. And Elop saying that it is now a three-horse race just doesn’t add up – MS, Android, Apple and Blackberry equals four.

It will be interesting to see how Microsoft partners like HTC, Samsung, LG react to this partnership. Bear in mind these players walked away from Symbian because of Nokia’s ambitions to control this ecosystem. Although Microsoft is winning a strong partner it could lose many others, particularly in the US.