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Is Microsoft (Nasdaq: MSFT ) finally starting to get it when it comes to portable and mobile devices? For the first time in a long time, there are reasons to be encouraged.
First, there was the recent management shakeup inside Microsoft's Entertainment and Devices division, which covers everything from its successful Xbox 360 console to its, ahem, less successful Zune media players and Windows Mobile smartphone operating system. Voluntarily or not (depends who you ask), division President Robbie Bach and Chief Technology Officer J Allard have left the division.
Then, following Bach and Allard's departures, there was the canceling of Microsoft's ill-conceived Kin social-networking phone project. Between the platform's limited feature set – Kin phones can't run third-party apps -- and its fragmenting of Microsoft's mobile efforts -- the Kin project was a pretty questionable initiative from the start. If nothing else, Microsoft deserves credit for pulling the plug on Kin once initial sales, as many predicted, proved terrible.
And now we have news that Microsoft has acquired a license from ARM Holdings (Nasdaq: ARMH ) , whose processor cores go into the chips that power most of the world's cell phones, as well as billions of other devices. What's more, Microsoft's ARM license isn't a conventional one, which involves the right to use microprocessor cores that ARM's already developed, but rather a more costly "microarchitecture" license that lets Microsoft develop its own processor cores based on ARM's technology.
Thus far, ARM's only given out a handful of microarchitecture licenses, with some prominent names being Qualcomm (Nasdaq: QCOM ) , which designed its own ARM cores for the Snapdragon chips often found in high-end Google (Nasdaq: GOOG ) Android phones, and Marvell Technology (Nasdaq: MRVL ) , whose application processors are based on proprietary ARM cores. And interestingly enough, another microarchitecture licensee is Samsung, the manufacturer of the energy-efficient Apple A4 chip (features a modified ARM Cortex-A8 core) that goes into the iPad and iPhone 4.
Countering the iPhone and iPad
The bottom line is that you don't get an ARM microarchitecture license unless you have some major plans for it. And this would sure be a good time for Microsoft to have some big plans for creating low-power ARM chips. Apple's (Nasdaq: AAPL ) proprietary A4 is a key reason why the iPhone 4's battery life is superior to that of any high-end Android phone -- and will likely be better than that of the first phones based on Microsoft's upcoming Windows Phone 7 operating system. A custom ARM core might be what's needed for Microsoft to stay competitive on the battery-life front.
But a bigger concern for Microsoft, without a doubt, has to be how much thinner, lighter, and less power-hungry the A4-powered iPad is than just about any netbook running Windows. The iPad is in prime position to take a big chunk out of the netbook market, and a successful Microsoft response will require big changes in hardware as well as software. Future Microsoft netbooks and tablets will need to eschew the relatively power-hungry Intel (Nasdaq: INTC ) Atom chips that go into current Windows netbooks in favor of ARM-based silicon that's not only more power-efficient, but also lends itself to thin and light Internet appliances like the iPad.
Will Microsoft succeed in righting its ship? I'd say that there are still a lot of big question marks. But thanks to recent moves, there are at least reasons for investors to think that Mr. Softy is no longer asleep at the wheel.