PC users won't be the only ones getting the number skipping upgrade from Windows 8.1 to 10. During Microsoft's (NASDAQ:MSFT) recent unveiling of the new OS in San Francisco, the company also confirmed that Windows 10 will replace Windows Phone 8.1.
But unlike the PC version, which will follow a traditional upgrade path, installing Windows 10 on smartphones leads to major questions about the graphical user interface and CPU architecture. Microsoft addressed interface concerns by stating that the mobile version of Windows 10 won't have a desktop mode like the PC version. However, the second question remains unanswered, since Windows 8.1 runs on x86 (Intel (NASDAQ:INTC) or AMD (NASDAQ:AMD)) devices, while Windows Phone and RT currently run on ARM-based ones.
Since Windows 10 will be an x86-based OS, Microsoft could be betting heavily on Intel to straddle the PC and mobile markets with new processors. Let's see why that could be an excellent long-term strategy for both companies.
What Windows 10 smartphones mean for Microsoft
In the past, the biggest problem for Microsoft's mobile business was that chipset designs from ARM Holdings (NASDAQ:ARMH) dominated 95% of the handset market.
ARM pushed Intel out of this market with two simple strategies: it only licensed chip designs to manufacturers, instead of manufacturing them, and it developed cheaper CPUs with lower power consumption -- making them ideal for mobile devices. ARM's dominance of smartphones forced Microsoft to develop an ARM-based smartphone operating systems, like Windows Mobile and Windows Phone, to reach mobile users. The big trade-off was that none of the x86-based software that PC users relied on would be compatible with the mobile operating systems.
Four years ago, that wasn't a major issue since smartphones weren't powerful enough to handle most desktop applications. But today's phones, many of which have quad-core CPUs and over 2GB of RAM, certainly are. Therefore, it makes sense to install Windows 10 on both smartphones and PCs and cut ARM-based systems out of the picture. That also means that the ARM-based Windows RT, which has become irrelevant with the recent launch of cheap Windows 8.1 tablets, could soon be axed as well.
Simpler than it seems
Switching the OS and CPU architecture across all mobile devices seems like a monumental task, but Microsoft has an obvious advantage -- it controls the majority of the Windows Phone hardware as well as the operating system. According to AdDuplex, Microsoft's handset division (formerly Nokia's) still produces 95% of all Windows Phone devices worldwide. Therefore, Microsoft can steadily replace its ARM-based Windows 8.1 devices with x86-based Windows 10 ones without upsetting too many third party handset manufacturers.
These new phones would run both Windows Store apps and scaled down versions of x86 desktop software. Just like desktop and mobile versions of websites, popular Windows software could switch between the two modes depending on the device. Cloud-based synchronization and backup options could then make a Windows 10 phone feel like a true extension of a user's desktop or laptop PC.
While this kind of bold change would be a huge risk for a company like Samsung (NASDAQOTH:SSNLF) (as we recently saw with Tizen), Microsoft doesn't have anything to lose at this point. According to IDC, Windows Phone only accounted for 2.5% of the global smartphone market in the second quarter, down from 3.4% a year earlier.
Will this be Intel's chance to shine?
Intel's new Atom processors are slowly becoming relevant again in the smartphone market. Asus' ZenFone and FonePad, Lenovo's K900, and Motorola RAZR i are all Intel-powered Android phones.
When Windows 10 launches for smartphones, I believe that Intel's processors will replace ARM-licensed ones in Microsoft's Lumia devices. While that wouldn't be a huge loss for ARM, it would grant Intel a much firmer foothold in the mobile market than its limited selection of x86 Android devices. Other smartphone manufacturers which want to diversify away from the crowded Android market, like Windows Phone makers HTC and Samsung, could also follow suit with Intel-powered Windows 10 devices.
Moreover, if Microsoft continues its free licensing deal for devices under nine inches, Windows 10 will remain the cheapest option for handset manufacturers, which actually pay Microsoft (not Google) patent royalties for every Android device sold.
The Foolish takeaway
In conclusion, Windows 10 not only represents a second chance for Microsoft, but one for Intel as well. If Microsoft successfully straddles the PC, tablets, and smartphone markets with a single OS, Intel's Atom processors could finally gain enough momentum to push back against ARM-licensed ones.
Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Intel. The Motley Fool owns shares of Intel and Microsoft. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.