New Microsoft Windows will run on British microchips

By HARRY GLASS
Updated: 10:29 EST, 6 January 2011

Computing giant Microsoft's new version its Windows software will run on microchips designed by British company ARM.

The link-up means ARM's chip designs will feature in a new range of Windows-based products, including tablets and mobile phones, which are likely to hit the shelves in two or three years time.

ARM's shares up up 28p (6%) to 499.6p today.

Brit power: Microsoft also said other Windows-based products would continue to use chip designs from Intel

The deal is a coup for Cambridge-based ARM, analysts said, and will allow Microsoft to push into the high-end tablet market, which includes products such as Apple's iPad.

ARM, which is a leading designer of chips for smartphones and tablets, saw shares rally to a 10-year-high after Microsoft's announcement at the Consumer Electronics Show in Las Vegas. The shares have climbed nearly 200% in the last year.

Unveiling the new software, Steven Sinofsky, president of the Windows division at Microsoft, said: "With today's announcement, we're showing the flexibility and resiliency of Windows through the power of software and a commitment to world-class engineering."

Microsoft also said other Windows-based products would continue to use chip designs from Intel.

Gareth Evans, analyst at brokers Investec, said the significance of the deal for ARM was "hard to overstate" and marked a move away from Microsoft's long-standing partner Intel.

"The confirmation shows a determination on the part of Microsoft to compete seriously with Apple and Google Android-based devices in the tablet and portable device market," he said.

"The new technology will eventually apply to a group of products, not just tablets, although it will realistically be two to three years before ARM based products will be released."

ARM has been subject to takeover speculation in recent weeks, with chip-maker Intel touted as a potential suitor. But Mr Evans said this was "highly unlikely" due to competition issues.

Warren East, chief executive of ARM, said the link-up with Microsoft would help deliver innovative products to customers.

He said: "We are excited by today's announcement, which marks a significant milestone for ARM and the ARM Partnership, and we look forward to working with Microsoft on the next generation of Windows."

ARM chips consume less power than traditional PC microprocessors, which is essential for battery-powered devices like tablets.