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It's no secret that the Intel (NASDAQ: INTC ) and Microsoft (NASDAQ: MSFT ) relationship that used to dominate the personal computing industry has come under significant stress these days. With Intel making an aggressive push into the Android smartphone and tablet spaces, and with Microsoft pushing its ARM (NASDAQ: ARMH ) -based Windows RT tablet platform, the "WinTel" monopoly is slowly but surely coming apart. However, one thing that seems to be a curious omission on Intel's part is the complete lack of support for Microsoft's Windows Phone. While today Windows Phone commands a fairly negligible share in the smartphone space, the risk of missing that boat -- should it go somewhere -- is too great to ignore.
The Microsoft-Nokia deal could create an Apple in the making
Many Intel bears correctly point out that the Apple iOS ecosystem's reliance on code that runs on the ARM instruction-set architecture makes it very difficult for Apple to move to an Intel-designed processor, even if it were to offer performance/watt benefits. However, Apple's processor design teams have now grown to be quite skilled, further diminishing any hope that Intel would ever be able to win the Apple iOS sockets.
Right now, every single Windows Phone is ARM-based -- and, in particular, Qualcomm (NASDAQ: QCOM ) -powered. While the Windows Phone application ecosystem, like the Modern UI applications on Windows 8/RT, are instruction-set independent, it doesn't seem like much of a stretch for some of Microsoft's partners to build a vast library of applications that run natively on the ARM instruction set. If this ecosystem were to grow meaningfully, it would be an arduous and costly endeavor for Intel to play in the Windows Phone space -- just as it was with Android.
So, the real question is why Intel's upcoming Merrifield system-on-chip, built on Intel's latest Silvermont processor core and Imagination Technologies, is aimed exclusively at Google's Android platform? While it's clear that Android has the lion's share of the smartphone market today, it's still far too early in the game to bet against Microsoft's own handsets. If the Windows Phone platform effectively becomes ARM-only (either by virtue of an excellent relationship between Qualcomm and Microsoft, or if Microsoft decides to build its own mobile chip), then any share gains for Microsoft is bad news for Intel.
So, what should Intel do?
It's a tricky situation. On one hand, it looks as though Microsoft isn't exactly thrilled with Intel as a partner. But on the other, are Qualcomm or NVIDIA (NASDAQ: NVDA ) any better, particularly as their bread and butter in mobile is on Android? In fact, the vast majority of Microsoft's PC and server software still synergize well with Intel silicon. It seems likely that an Intel-Microsoft partnership in smartphones would not only strengthen Microsoft's brand and image in that space -- Intel and Microsoft are two very powerful brands individually -- but it would make sure that Intel doesn't get locked out of any more ecosystems.
The real question is whether Intel can deliver the right silicon (leadership applications processor and communications) on schedule and with the requisite software stack. It seems likely that there are very few technical barriers here, but the political ones on both Microsoft's and Intel's parts are still quite present. It does seem likely, though, that Microsoft will enjoy some degree of success with Windows Phone, and Intel really should be a part of it.
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