ARM Says Microsoft Software Opens Door to Televisions, Cars

ARM Holdings Plc (ARM), whose chip designs are used in Apple Inc. (AAPL)’s iPad, said Microsoft Corp. (MSFT)’s adoption of its technology will help Windows software expand into cars and televisions.

ARM may start generating royalties from chips using its technology in Windows-based laptops and tablets as early as next year, President Tudor Brown said in an interview today. Microsoft’s use of ARM technology will help the Cambridge, England-based chip designer gain market share, he said.

Microsoft will preview a Windows operating system designed for tablets this week, according to three people familiar with knowledge of the plans. Adapting Windows to better support devices that can compete with Apple Inc.’s iPad will also help ARM increase market share and may open the door for new uses for its technology, Brown said.

“Where it gets potentially game-changing is, what other opportunities does it open up for Microsoft,” Brown said in Taipei. “This opens up a much bigger market, and makes a valid and viable operating system for” TVs and automotive electronics, he said.

ARM seeks new applications for its chip technology as it faces competition from Intel Corp., the world’s biggest computer chipmaker. Semiconductors based on ARM’s designs are used in most tablet computers, including Apple’s iPad, and the company is also targeting the server computing market.

Tegra Chip

ARM expects its share of the market for chips used in mobile computers, such as tablets, notebooks and low-cost netbooks, to jump fivefold to 50 percent by 2015, Brown said. The company’s current 10 percent market share will expand to 15 percent by the end of the year, he said.

“We’re going to see tablets, and eventually laptops and servers using ARM-based operating systems, which should open significant opportunities,” said Jerome Ramel, a Paris-based analyst at Exane BNP Paribas with a “neutral” rating on the stock. “For servers and laptops, power consumption is becoming crucial, and ARM is all about power consumption.”

ARM has risen 35 percent in London trading this year, giving the company a market value of 7.7 billion pounds ($12.7 billion). The stock added 1.4 percent to 572.5 pence on May 27. U.K. and U.S. markets are closed for holidays today.

Josie Taylor, a Microsoft spokeswoman, doesn’t immediately have a comment.

Microsoft will showcase the operating system’s touch-screen interface running on hardware with an Nvidia Corp. (NVDA) Tegra chip, said the people last week, declining to be identified because the plans are confidential.

Global shipments of tablets will climb to 215 million units in 2015 from 17 million last year, Toni Sacconaghi, a New York- based analyst at Sanford C. Bernstein & Co., wrote in a May 26 report. The devices will cannibalize purchases of consumer PCs, reducing computer sales growth by 2 percent annually between 2010 and 2015, Sacconaghi wrote.

To contact the reporters on this story: Tim Culpan in Taipei at tculpan1@bloomberg.net; Cornelius Rahn at crahn2@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Kenneth Wong at kwong11@bloomberg.net

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