In order to do this Windows 8 Pro would have to have support for screens smaller than 7 inches, and currently Windows 8 Pro doesn't even support 7 inches the rumored Windows Blue update is supposedly going to add support for 8 & 7 inch devices, but it is an interesting concept :)
I would think that screen resolution rather than screen size is the determining factor. If this device follows the current trends, its phone screen resolution will be at least 1366 x 768; the current sweet spot for Win 8 devices.
I think at the right price, and $1600 does seem to be about the right price, this platform should do well. I can see many desiring the phone plus two docking stations; one for home, one for work; maybe even a third for another room at home.
I'm sure that many other manufacturers will not be two far behind. Microsoft has been planning such a platform for a long time. I recall Apple mentioning such as well. I can't imagine that Samsung won't soon present such a platform surrounding its Galaxy phones... other Android players as well as the latest batch of processors from NVidia and Qualcom could easily function as the core of a workstation/dock. My dream for several years now has been a full, powerful windows system in the pocket. When Haswell is in full stride, full OS phones will be very practical and the market will explode.
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