(Repeats to take out additional text at top of story)
* ARM-supported Windows version will drive tablet move
* Marks shift in long-standing Intel-Microsoft alliance
* Big boost for ARM, shares rally more than 7 percent
* Analysts skeptical of success in post-PC world
(Adds CEO Ballmer comments, Kinect sales)
By Bill Rigby
LAS VEGAS, Jan 5 Microsoft Corp is taking its
biggest step away from a long-standing, lucrative alliance
with Intel Corp, teaming up with Britain's ARM Holdings to
take on Apple Inc in the red-hot tablet and smartphone arena.
Microsoft , the second-largest U.S. technology
firm, plans to design a Windows operating system compatible
with chips designed by ARM , an Intel
rival and the dominant producer of chips for smartphones and
Chief Executive Steve Ballmer pitched the move in a
typically ebullient opening address at the Consumer
Electronics Show in Las Vegas, looking to convince investors
that his company can hold its dominance in a world moving away
from PC-centric computing.
"Whatever device you use, now or in the future, Windows
will be there," said Ballmer, stalking the stage in a packed,
supportive auditorium, in his trademark blue shirt and slacks.
"Windows will be everywhere on every kind of device, without
Investors and analysts were not immediately convinced that
the software giant can maintain the dominance of Windows as
Apple's iPad leads the exploding tablet market and
Google's Android smartphone systems take off.
"The PC is not going to be the 95 percent dominant
solution five years from now," said IDC analyst Al Hilwa. "The
trajectory of the iPad and all these Android devices is to
take on multiple form factors."
The lack of a coherent strategy on tablets hobbled
Microsoft's share price last year, and its shares continue to
trade around the same level they did eight years ago.
"We've already seen that the personal computer has lost
dominance as a computing platform," said Brendan Barnicle, an
analyst at Pacific Crest Securities. "Microsoft has to deal
with the fact that Apple is making these really compelling
Microsoft's move is the latest major win for ARM, which is
making huge strides in mobile computing and on Wednesday also
announced that graphics chipmaker Nvidia will begin designing
central microprocessors for computers based on ARM
CORNERING THE MARKET
Microsoft's new approach marks a shift away from Intel
, whose chips have held a hegemony on Windows
operating systems on personal computers, and suggests the
breakdown of the fabled "Wintel" alliance, which set the
standard in early computing.
"It's highly symbolic, the Wintel duopoly that was such a
good partnership for so long is fraying at the edges a little
bit," said Todd Lowenstein, a portfolio manager at HighMark
The U.S. software maker offered no time frame for the
launch of the ARM-supported operating system version, but
Windows unit chief Steven Sinofsky said Microsoft typically
aims for 24 to 36 months between major Windows versions,
suggesting a launch date of between October 2011 and October
That means tablets capable of taking on Apple's iPad may
be a year or more in coming, running the risk of leaving it
too late to catch up with Apple's iPad, and betting that
tablets will be an enduring new market.
"It's still early in the adoption phase for tablets," said
Lowenstein. "Prices will be coming down, there is a mass
market opening up even more, and both Intel and Microsoft have
the capability to catch up. Microsoft has made a business
model out of second-mover advantage, using its scale to crush
Research firm Gartner expects worldwide smartphone sales
to treble to 851 million units by 2014, while it sees tablets
increasing seven-fold to more than 150 million units by 2013.
In comparison, PC sales are expected to increase at a much
more sedate pace, close to 15 percent this year, rising to 610
million units worldwide by 2014, according to Gartner. By that
time, Gartner expects tablets to have displaced about 10
percent of PC sales.
In his presentation Ballmer also pointed to the success of
the company's new Kinect motion-sensing game system, which he
said had sold more than 8 million units in its first two
months on the market. [ID:nWEN5108]
NEW CHIPSETS FOR WINDOWS
High-powered, low-battery chips made by ARM dominate the
smartphone and tablet markets, and are featured for instance
in Apple Inc's iPhone and iPad.
During Ballmer's presentation, he demonstrated a Windows
desktop running off ARM-based chip architecture, including one
powered by Qualcomm's popular Snapdragon processor
and another by Texas Instrument's OMAP.
Also demonstrated was a desktop powered by Nvidia's
Microsoft's operating software for mobile devices -- Phone
7 -- already supports ARM processors, but the new version of
Windows would mark a shift in its core operating software for
Samsung , Dell and Asustek
have already announced that tablets running Windows 7 --
Microsoft's core product -- will go on sale this year.
"They have to evolve the PC, they have to redefine the PC.
And it looks like they kind of got the memo on this now," IDC
analyst Hilwa said.
Shares of ARM rose 7.7 percent on the London Stock
Exchange ahead of the announcement. Microsoft shares edged 0.3
percent lower to close at $28.
(Additional reporting by Alexei Oreskovic; Writing by Edwin
Chan; Editing by Gary Hill and Steve Orlofsky)