Can a Nokia Corporation (ADR) (NOK) Tablet Compete With the iPad?

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While the whole tech world seems to stop for the Consumer Electronics Show, or CES, in January, it’s by no means the most influential tech conference around. Hot on the heels of CES is the Mobile World Conference, or MWC, in Barcelona. The conference is set to take place just a week from now and will dominate tech news coverage Feb. 25 through the 28th.

With technology spending increasingly going mobile, the stature of MWC has been growing in recent years; that means more companies have shifted major product announcements to MWC. One of the hottest areas of speculation headed into next week is what Nokia Corporation (ADR) (NYSE:NOK) has up its sleeves. The company is still fresh into its transformation as the flagship handset manufacturer for Microsoft Corporation (NASDAQ:MSFT)‘s  Windows Phone 8.

Nokia Corporation (ADR) (NYSE:NOK)Rumors across the past few months said Nokia would emphasize something other than phones for the event: It was reported that the company would announce a tablet instead. Nokia tablet reports continued through last week, when researcher Strategy Analytics poured cold water on Nokia tablet talk this week, as it reported that Nokia would not unveil a tablet.

Yet even if Nokia doesn’t unveil its tablet, it’s still an interesting topic for the company. Let’s explore the background of Nokia’s tablet development, and what factors could make a Nokia tablet a hit or a miss.

A Nokia tablet?
There’s no question that Nokia is working on a tablet. The company’s VP of design, Marko Ahtisaari, had previously confirmed that one-third of his time was spent working on a tablet concept. With just about every major smartphone company having an accompanying tablet line, it would seem crazy for Nokia not to look into making one.

Not only that, but Nokia has some potential for differentiation in the tablet space. Android companies such as Samsung, Acer, and Motorola have struggled to replicate the kind of traction Android has in smartphones in the tablet space, while Nokia would be able to focus on Windows. The company could follow in Microsoft’s footsteps and offer a consumer-focused Windows RT device or a more powerful x86-based processor from Intel Corporation (NASDAQ:INTC) . With Intel’s more power-conscious Haswell chips slated for a June release, Nokia could first release an RT device while working with Intel on a Haswell-based tablet for later release. In critiques of the Surface Pro, most reviewers focus on the tablet’s compromise between being a laptop and a tablet while failing to be as satisfying as either device. With Haswell’s more power-conscious profile, Nokia could overcome these critiques by having more room to design a slimmer Intel-based tablet with greater battery life.

Microsoft’s pricing gambit
Also important is the role of the owner of the tablet platform. Tired of middling Android performance in tablets, Google Inc (NASDAQ:GOOG) managed to find success by launching the $200 Nexus 7. It’s an impressive tablet for the money, but that’s entirely the problem: The price point leaves little to no room for profits. If you’re an Android hardware partner, there is little incentive to design a sub-$200 tablet when you can create a smartphone that costs a similar amount to build (if not less) and can sell for anywhere from $300 to $500.

Contrast that with Microsoft, which made a calculated gamble with the Surface. Even though the Surface RT has a bill of materials close to the $300 range, near the same level as the larger iPad, Microsoft priced the Surface at a comparable level to the iPad. The company could have priced the Surface less aggressively and aimed for no margins in an attempt to establish a market for Windows tablets; however, the company chose to leave space open for hardware partners. Microsoft has been working with hardware PC partners since the 1980s and clearly didn’t want to position them out of the market with Surface’s pricing.

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