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Microsoft Jilts Intel at the Smartphone Altar

As computing shifts from the desktop to mobile, Intel (INTC) has cause to worry robust new levels of competition. And a series of announcements at the 2011 Consumer Electronics Show (CES) -- including Microsoft's (MSFT) plans to release a version of Windows for ARM chips -- have only heightened the company's concern.

Technically, Microsoft said Windows will support system-on-a-chip (SoC) architectures from a number of companies, including Intel and AMD (AMD), and that means an x86 architecture. But in the past, Microsoft and Intel were so close that the combined platform was nicknamed Wintel.

Not so any longer, because Microsoft will also embrace ARM-based chips used in mobile computing from such vendors as Nvidia (NVDA), Qualcomm (QCOM) (which just bought Wi-Fi chip maker Atheros Communications for $3.5 billion, giving it another part of the smartphone and tablet puzzle), and Texas Instruments (TXN). That means Intel will have to fight that much harder for a share of mobile computing. As Microsoft noted in its press release:

SoC architectures consolidate the major components of a computing device onto a single package of silicon. This consolidation enables smaller, thinner devices while reducing the amount of power required for the device, increasing battery life and making possible always-on and always-connected functionality. With support of SoC in the next version of the Windows client, Microsoft is enabling industry partners to design and deliver the widest range of hardware ever.
Widest range of hardware ever -- by definition, that means less Intel. Here's a look at some of the new form factors that Microsoft wants to promote:

Not that Microsoft will necessarily help with tablets and smartphones. The leaping growth of Google (GOOG) Android may mean that an ARM-version of Windows won't necessarily address Microsoft's mobile shortcomings.

However, Intel's problems don't end with smartphones and tablets. AMD announced its Fusion chip line, which not only seems to pack a lot of technical punch, but could drive laptop prices down to the $200 to $500 range. Kiss high margin chip sales goodbye.

And then there's Nvidia's Project Denver CPU, an ARM processor for desktops, workstations, and servers. Because the chips will (eventually) run Windows, they could become a high-performance, low-cost, and -- importantly â€" low-power-consumption device that would save corporations money in purchasing and running equipment. That cuts off Intel's traditional lock on PCs and raises the stakes on its late attempt for mobile relevance. All in all, a tough time for Intel.


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