Not too long ago, it would have taken quite the stretch of imagination to picture a Nokia smartphone as the belle of the ball at the Consumer Electronics Show in Las Vegas last month.

But there it was, the Lumia 900, winning multiple awards and basking in attention from the twittersphere.

The gadget wouldn’t have been there if Nokia hadn’t decided last February to bank on Microsoft’s Windows Phone 7 instead of its outdated Symbian platform.

The foundering Finnish handset maker and the U.S. software giant have something akin to a symbiotic relationship, with Nokia counting on Windows Phone to rejuvenate its sinking smartphone business and Microsoft betting that its overseas partner will be the catalyst to get the platform off the ground – a platform that needs to gain traction for Microsoft to stay relevant in what many call the post-PC era.

With Nokia’s Windows Phone push under way and other manufacturers signed on to the platform, some are betting the operating system will see meteoric growth.

IHS iSuppli boldly predicted in January that Windows Phone would take the No. 2 spot in global handset rankings behind Android but ahead of Apple’s rock-solid iOS by 2015. The research firm isn’t alone in its latest forecast.

Gartner and IDC both boldly predicted last spring that WP7 would overtake iOS by 2015 with about 20 percent of the market. Microsoft is so bullish about its prospects that one of its marketing executives said in September that those estimates were conservative.

But there are some hurdles to clear before those expectations for sky-high growth can come true.

Moving Windows Phone from 2 percent to second place will require Microsoft and its cohorts in the handset arena to assemble a healthy assortment of apps, launch hugely popular smartphones and convince consumers that they’re not just limited to iOS or Android.

Keep in mind its still-miniscule market share: Microsoft is some ways away from realizing the “third ecosystem” it’s talked so much about. 

Microsoft is showing vigorous growth on the apps front. Its big challenge lies in convincing manufacturers other than Nokia to make Windows Phone smartphones. Despite sinking what will eventually amount to billions of dollars into Nokia, including $250 million in “support payments” during the fourth quarter alone – Microsoft has repeatedly said it needs to get other manufacturers on board.

“Nokia is an amazing catalyst, but they’ll be the first to tell you they’re just part of a third ecosystem,” says Casey McGee, senior marketing manager for Microsoft’s Windows Phone division. “Other successful OEMs (original equipment manufacturers) will help Microsoft and Nokia and vice versa. It’s about creating an ecosystem that’s greater than the sum of its parts.”

But not only will those manufacturers have to pay for the privilege of using the platform – Android is free, except for the licensing fees Microsoft is squeezing out of just about everyone but Motorola Mobility  – Microsoft’s strict hardware requirements limit what manufacturers are allowed to do.

It’s this fact that leads ABI Research analyst Michael Morgan to be more bearish than bullish on Windows Phone.

“Manufacturers do pay licensing fees (to Microsoft) for Android, but they get the ability to have the freedom to leverage their core competencies,” Morgan says. “Microsoft is taking that away for a fee.”

Many manufacturers are already struggling to maintain their bottom line. Motorola Mobility has long had difficulty staying in the black, LG’s handset division just posted a profit for the first time in seven quarters, HTC’s earnings dropped off 26 percent during the last three months of 2011 and Sony Ericsson lost $266 million in its final quarter as a joint venture.  

The challenge of making a profit in the low-margin, high-competition smartphone business makes it more important than ever to find ways to set smartphones apart from the pack, whether by competing on the high end with innovative new hardware features or on the low-end with price.

For companies already dipping into loss-making territory, moving to the less lucrative low end isn’t much of an option, even if Microsoft’s specs allowed for it, and Morgan doesn’t think Microsoft is giving them enough wiggle room to find other ways to differentiate.

“They’re saying ‘this is the hardware you’re going to use, this is the software you’re going to use, and you’re also going to pay for it’ – making it harder to compete on price,” he says. “For all the non-Nokia folks, it’s not a great value proposition. They’re already struggling, and Windows Phone gives then even fewer options to leverage any kind of competitive advantage they can eke out.”

As indicated by the glut of rosy forecasts about Windows Phone future successes, Morgan’s opinion isn’t a popular one.

Microsoft-imposed limitations guarantee a level of user-friendly homogeneity, consistency which the company characterizes as a strength, not a weakness, in its platform.

“We learned the hard way that if you don’t really define what the phone is going to be, it makes it very easy to splinter and fragment that experience for both the end user and application developers,” McGee says. “So when we came out with Windows Phone 7, we said very clearly that there were a defined set of specifications developers can count on.”

Forcing manufacturers to comply with a rigid set of hardware specifications ensures that Windows Phone will be able to avoid the fragmentation problem that has vexed Android devices. An Android device could be anything from a high-end tablet to an entry-level  ZTE phone. In contrast, Windows Phone devices are comparatively uniform, with Nokia’s Lumia 710 on the low end and Samsung’s Focus S on the high end.

McGee also disagrees that the specs make it impossible to differentiate smartphones.

“You can tell from 30 feet away the difference between Nokia, HTC and Samsung devices,” he says. “They’re noticeably different in look and feel and they also deliver unique apps and services.” Nokia’s colorful Lumia 900 for AT&T is a far cry from the carrier’s LTE-ready HTC Titan II.

McGee also says Microsoft is flexible when it counts. “We don’t build Windows Phone in a vacuum,” he says. “We talk to carriers and manufacturers, and we understand what it is they aspire to do.”

Case in point: AT&T’s upcoming LTE-ready HTC Titan II.

“We sat down with AT&T and they said they wanted LTE. That’s part of the reason you saw us announcing an amazing LTE device with AT&T at CES,” McGee says. “We have that conversation with everyone.”

Nokia developer relations chief Richard Kerris confirms that working with Microsoft has involved a good deal of collaboration. Though the feature set for Windows Phone Mango was already locked down when the two companies kicked off their partnership, “going forward you’re going to see things come from the relationship that take advantage of the hardware capabilities of our devices,” Kerris says. “There’s definitely a relationship of ‘how can we make this better, take this farther’.”

Nokia has done a good deal of work on near-field communications and wireless charging, leading to rumors that its next spate of Windows Phone devices will include NFC and cord-free powering.

An HTC spokeswoman said in an e-mail interview that Microsoft’s specifications are “less flexible” than for an open platform like Android, as you might expect, but offer simplified software testing and upgrades.

“Hardware specifications are only one way manufacturers might differentiate, and it’s true that with Windows Phone we need to get a little more creative beyond the spec race,” she said.

HTC is using industrial design and original software to set its seven Windows Phone devices apart while staying within Microsoft’s parameters for the platform. For instance, the Titan II has a 16-megapixel camera and is loaded with software for special effects, and HTC’s Hub service allows users to get exclusive apps for free on Windows Marketplace.

“Windows Phone offers a consistent experience across all devices, which not only means people know what to expect from phone to phone, but developers can also shape great app experiences that they know will be consistent regardless of the device or OS version number,” she said. “Android offers a more open-ended approach that leads to a high amount of innovation and differentiation around specs and the entire phone experience (such as with HTC Sense).”

LG’s comments have been less flattering. The company couldn’t be reached for comment, but said in an interview with Pocket-lint earlier this month that while it remains optimistic for the long term, its first line of Windows Phone 7 handsets hasn’t so far lived up to expectations.

“We strongly feel that it has a strong potential even though the first push wasn’t what everyone expected,” LG marketing strategy executive James Choi told the publication. LG’s Windows Phones include the Optimus 7 and the Quantum.

Samsung did not reply to interview requests. The company’s smartphone lineup is dominated by Android, but it makes three Windows Phone devices and one Windows Phone handset.

IDC analyst Ramon Lamas, one of the first to put out a gung-ho forecast for Windows Phone, is still bullish about the platform’s prospects. But he doesn’t think Microsoft or its handset partners can afford to be complacent.

“I want to see Microsoft and Nokia – for that matter, virtually any smartphone maker out there – willing to be on the cutting edge of technology,” he says. “Keeping up isn’t good enough. You have to claim a stake in the market to do things better than anyone else.”

If rumors about the next iteration of Windows Phone come true, Microsoft is setting out to do just that.

Hardware, of course, is only one part of the equation. Apps also play a key role in drumming up enthusiasm with consumers, and there’s widespread consensus that the company is doing it right when it comes to apps.

Tango, AccuWeather, Glu Mobile, Spotify and Polar Mobile – which have made apps for Windows Phone and a number of other platforms – all said in interviews that Microsoft was supportive, easy to work with and provided them with a high-quality set of development tools. The platform’s comparative lack of fragmentation further simplified the development process.

The developers also said they benefitted from the comparably diminutive size of Windows Marketplace, which is about one-ninth the size of the App Store and Android Market.

“Clearly, we’re very fortunate that we really don’t have any discoverability problems,” says Tango CTO Eric Sutton. Tango is the only video chat service available for Windows Phone – not even Microsoft-owned Skype has come out with an app for the platform.

The small-town feel of the Windows Marketplace might not last long. McGee says the Lumia launch spurred developer interest, helping the platform rack up 300 new apps each day.  For now, at least, developers are enjoying the lack of competition.

“It’s the difference between hundreds of thousands of apps and thousands of apps,” says Adam Flanders, senior vice president of sales and marketing for Glu Mobile. “Windows Phone makes a lot of sense for us, because people are able to discover apps more easily.”

Microsoft’s cozy relationships with app developers should not come as much of a surprise, as the company has a long history of working well with developers.

But for Windows Phone to succeed, Microsoft is going to need both handsets that consumers want to buy and the apps that bring those devices to life.

The analyst’s crystal ball isn’t always accurate: iSuppli was dead wrong about its 2009 prediction that Windows Mobile would hold more than 15 percent of the global cell phone market this year “second only to the Symbian operating system” – instead, Microsoft currently holds just 2 percent of the wireless market.

Microsoft and Nokia are playing catch-up to iOS and Android, and their effort is far from over.