I attended this year’s Nokia World in Abu Dhabi on October 22 and 23 — perhaps the last one that Nokia will host to showcase its devices (Microsoft wants to acquire Nokia’s device and services business). And it seems that Nokia saved its best for last. The company announced its entry into the loosely-defined phablet category (smart devices with diagonal screen size of more than 5 inches but less than 7 inches) with two devices: a top-of-the-line flagship device, the Lumia 1520, and a more affordable version, the Lumia 1320. It also announced its first tablet, the Lumia 2520. It also launched three new Asha devices: Asha 500, Asha 502, and Asha 503. However, Nokia has neither announced the release date for its new devices nor identified which operators will carry them.

The event tag line was “Innovation Reinvented,” and Nokia did demonstrate many innovations, especially around imaging software. It launched new apps like the Nokia Camera, which combines Smart Camera and Pro Camera apps; Refocus, which adds Lytro-like variable depth of field; Storyteller, which integrates photos and videos onto HERE maps; and Beamer, which shares Lumia’s screen in real time over Wi-Fi or cellular networks.

In spite of these impressive product launches, I believe Nokia/Microsoft will face three key challenges in Asia Pacific:

  • Stiff competition from established and low-cost manufacturers. Samsung has an early-mover advantage in the phablet category, and consumers are very likely to compare the Lumia 1520 with the Samsung Galaxy Note 3. The retail price for the Lumia 1520 is $749, while the Note 3 from Verizon costs almost $700. In addition to being about $50 cheaper, the Note 3 weighs about 40 grams less than the 1520, comes with a bundled stylus, and has 1 GB more RAM. Meanwhile, Chinese manufacturers are flooding some key markets (China, India, and Thailand in particular), with low cost dual-SIM phones, phablets, and tablets. Consumers in these markets are price-sensitive and tend to follow the mantra of more for less (i.e., a more loaded phone in terms of hardware or software features for less price).
  • Convincing consumers to shift from established OS ecosystems to Windows Phone. Microsoft has now introduced major apps previously missing on its platform like Instagram, Papyrus and Vine. But consumers still have doubts how quickly the “next big app” will be available on Windows Phone platform, if at all.
  • Windows RT is not the top choice for tablet users. Windows RT has not been well received by consumers around the world. This is why Microsoft wrote down $900 million for its Surface RT inventory. So it will be difficult for Nokia to convince people to replace their Apple iPads and Samsung Galaxy Tabs in favor of a Lumia 2520 running Windows RT.

Nokia is a late entrant in both the phablet and the tablet categories — markets in which Samsung and Apple, respectively, have already established themselves as the dominant players. To really challenge them, Nokia/Microsoft will have to work both on the product as well as sales and marketing side. This means reducing the time-to-market for new phones and Windows Phone updates, introducing innovative features beyond just imaging, competitively pricing their phones, and bundling exclusive content and services like navigation or music. In emerging markets like India, Indonesia, and Thailand, Nokia should offer its devices via interest-free equated monthly installment schemes, like Samsung does, to further lower barriers to adoption.