January 6, 2011 / 12:13 AM / 7 years ago

RPT-CES-UPDATE 5-Microsoft links up with ARM in new tablet drive

 (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 (Reuters) - 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 
tablet computers.	
 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 
architecture. [ID:nN05272751]	
 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 
Capital Management.	
 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]	
 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)	

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