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5/23/2011
11:48 AM
Paul McDougall
Paul McDougall
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Microsoft Should Pursue ARM Acquisition Next

Tiffs with longtime partners HP and Intel show that Redmond must take control of its own destiny to make strides in mobile computing.

Microsoft can operate mostly as it pleases given that its decade-old antitrust deal with the U.S. Justice Department expired on May 12. In a column last week, I argued that the deal's end should embolden Microsoft to be more aggressive on acquisitions, and that its $8.5 billion agreement to buy Skype could be just the first of many post-consent decree moves.

Microsoft's next acquisition target? It should be mobile chip designer ARM, and here's why.

For years, Microsoft has relied on a vast network of OEMs and component suppliers to get Windows and other core products into the hands of consumers and businesses. But some of the company's oldest alliances are now waning in the face of a new competitive landscape in mobile computing. Tablets and smartphones are the hottest things going in tech, and when it comes to getting a piece of the action, nobody feels much like sharing.

In just the past few weeks, two of Microsoft's most important partners, Intel and Hewlett-Packard, have delivered clear signals that going forward they're looking out for No. 1.

HP made plain the fact that it plans to be Windows-free in tablets and phones by making its WebOS the sole focus of its development efforts for those devices. Fearing he may have lost too much ground already, HP CEO Leo Apotheker isn’t going to wait around until Microsoft delivers a tablet version of Windows 8 next year.

As for Intel, its execs this week showed that they’re willing to undermine their ally's efforts to make Windows a true multiplatform OS that runs on chips other than their own. They slammed Microsoft’s newest partner—ARM. Intel senior VP Renee James went so far as to say Windows-on-ARM will be a compatibility nightmare for users and developers.

"On ARM, there'll be the new experience, which is very specifically around the mobile experience, specifically around tablet and some limited clamshell, with no legacy OS," James said. "Our competitors will not be running legacy applications. Not now, not ever."

All this posturing shouldn't be too surprising. HP and Intel execs are doing what they're paid to: Take steps they think are in the best interests of their companies, employees, and shareholders.

Clearly, Microsoft can no longer count on historical alliances when it comes to playing in tech's new growth markets. It needs to master its own destiny, and it can do so only if it's in control of the supply chain. Oracle CEO Larry Ellison arrived at that same conclusion before agreeing to pay $7.4 billion for Sun, including its Sparc chips, with an eye to creating a fully integrated business computing stack.

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