The PC business is sluggish at best, but Microsoft is determined to stay relevant no matter what, and a 7-inch Surface tablet may be the answer.

The Redmond giant is reportedly planning a smaller, 7-inch version of its Surface tablet to help it stay competitive and go up against similar-size devices from Apple and Google — the iPad Mini and the Nexus 7.

According to a new report from the Wall Street Journal (WSJ), citing sources familiar with the company's plans, the 7-inch slate will go into mass production later this year as part of a new lineup of Microsoft Surface tablets.

Microsoft reportedly decided to get into the 7-inch tablet business to challenge the 7.9-inch iPad Mini and the 7-inch Nexus 7, states the report. The company further plans to cut the prices of its Windows and Office software products in a bid to boost sales of lower-cost touchscreen devices running Windows software.

Component suppliers also told the WSJ that Microsoft is still testing its own brand of smartphone, but it remains unclear when it will actually bring the device to the market. The WSJ reached out to Microsoft for comments, but got no response.

Microsoft started shipping its 10.6-inch Surface RT tablet back in October, sparking plenty of controversy and even anger among its partners who saw Microsoft as a software supplier, not a hardware competitor. The Surface RT tablet packs an ARM processor and the Windows RT operating system (OS). Earlier this year, Microsoft also started shipping its Surface Pro tablet, which packs an Intel processor.

Back in January market research firm IDC said that Microsoft needs to adjust to the market trends of smaller displays and lower prices, and it seems the company is following suit. While the Surface RT tablet failed to boost the company into the top five tablet vendors, with shipments a little less than 900,000 units, a smaller-size tablet might be able to make a difference.

Consumers increasingly shifted toward smaller tablets due to their lower price tags and their convenience, as they can be held in one hand instead of both hands. As Microsoft finds itself increasingly stuck in its PC business, tablets may be its salvation and the answer to stay relevant in an ever-changing industry. The future of PCs paints a gloomy picture, as users move to alternative computing devices such as smartphones and tablets. Would a 7-inch Surface tablet help Microsoft better compete with rivals?