Microsoft Plans New Windows Version for Tablets

Microsoft is working on a version of Windows OS for devices such as tablets and the company said its Windows Phone 7 software is making headway in the booming smartphone market.

Windows 7 Phone: Too little, too late? At least, that's what Gartner says. The research company claims Microsoft has 'lost the plot' and argues that Windows Phone 7 will not get it back into top three or even fourth position in the global mobile market. Photo: Axel Bührmann/Flickr

Tech enthusiasts who have been flummoxed by Microsoft Inc’s slower-than-molasses reactions to the new tech market trends – such as motion gaming (Nintendo Wii, 2006), smartphones (Apple iPhone, 2007), and tablet computing (Apple iPad, 2010) – got a bit of good news these days.

According to the Wall Street Journal and Bloomberg reports, the software giant is finally porting its Windows operating system to non-PC, thin and light hardware systems, opening up core product line to a new generation of devices.

The company plans to unveil a version of its operating software that runs for the first time on processors designed by UK-based ARM Holdings PLC. ARM’s processors dominate the tablet and handheld device market.

Microsoft intends to announce a version of its operating system to run on ARM chip architecture, which competes with the “x86” designs favored by Intel, the Wall Street Journal cited people familiar with the plans as saying.

It was unclear when such an operating system might come to market, but the U.S. software maker could claim lost ground in tablets and other battery-powered mobile devices by forging a new partnership with ARM.

Bill Cox, a spokesman for Redmond, Washington-based Microsoft, declined to comment. Charlene Marini, a California- based spokeswoman for ARM, said the company doesn’t comment on rumor or speculation. And Tom Beermann, at Santa Clara, California-based Intel, also declined to comment.

Microsoft said on Tuesday that more than 1.5 million cellphones carrying Windows Phone 7 operating software have sold in the first six weeks of launch, meeting what the company called “realistic” expectations.

The operating system would give Microsoft another way to attack the market for tablets and phones, where it’s lost ground to Apple and Google . ARM chips – made by Qualcomm Inc., Texas Instruments Inc. and Samsung Electronics Co. – are used in most smartphones, as well as Apple’s best-selling iPad.

A full-featured version of Windows for ARM chips is the best way for Microsoft to make a dent in the iPad’s lead, said Robert Breza, a Minneapolis-based analyst for RBC Capital Markets. While Windows is dominant in the personal-computer market, it hasn’t parlayed that into tablet success yet.

“They’ve got to come back with a product that’s better than ‘me too’ and is equal if not better in features,” Breza said. He has an “outperform” rating on Microsoft’s stock, which he doesn’t own. “A lot of tablets today are inferior to PCs.”

The sales numbers were disclosed for the first time by Achim Berg, vice president of business and marketing for Windows phones, in an internally conducted interview posted on Microsoft’s website.

“It’s a decent number. The mobile market is going to be a battle for Microsoft,” said Colin Gillis, an analyst with BGC Partners who has a “buy” rating on Microsoft.

Microsoft’s disappearance from the phone market and its delayed response to tablet devices like Apple’s iPad has been seen as a drag on shares this year. Its shares closed up 26 cents on Tuesday at $28.07.

But Gillis noted that the shipment of 1.5 million phones was sales into the distribution channel, rather than directly into consumers’ hands, which tempers the announcement.

Taiwan’s HTC, Dell Inc, Samsung Electronics and LG Electronics are among the vendors who have launched or plan to begin selling Phone 7-based devices.

The industry is closely watching the early days of what could be a longer-term driver of growth. Gillis forecasts about 25 million Phone 7 sales in 2011. In contrast, analysts expect Apple to sell more than 60 million iPhones next year.

Apple sold 7.46 million iPads from the product’s April debut through September. The device accounted for 95 percent of the tablet market last quarter, according to Strategy Analytics.

“We all know that the competition is extreme in this industry, and we have to compete on multiple fronts,” Berg said in the interview. “We are on a path to begin releasing the first of several updates in the next couple of months, and several more mobile operators around the world will introduce Windows Phone 7 on their network in 2011.”

Gillis noted that Microsoft is spending $500 million to market the Windows 7 smartphone, and suggested the company could see market gains by using some of that cash to subsidize the devices so consumers get them for free.

Microsoft CEO Steve Ballmer is scheduled to kick off the CES show the night of Jan. 5 with a keynote speech, in which he is expected to showcase the company’s consumer technologies. In a departure from past year, Microsoft has scheduled a press conference that afternoon prior to Mr. Ballmer’s speech.

It’s unclear how quickly Microsoft can deliver a new tablet-friendly version of Windows. The next major release of the operating system, Windows 8, isn’t expected until 2012 some time. “They’re desperate to show they’re in the game,” one of the people familiar with Microsoft said. [via Reuters, Bloomberg and Wall Street Journal]

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