Microsoft Said to Limit Device Makers’ Chip-Partner Choices

Microsoft Corp. (MSFT) has asked chipmakers that want to use the next version of Windows for tablets to work with no more than one computer manufacturer, three people with knowledge of the plan said.

Chipmakers and computer makers that agree to the terms will get incentives from Microsoft in exchange for accepting the restrictions, which tie a single chipmaker to one tablet design, said the people, who declined to be identified because the new program hasn’t been made public.

Seeking to limit variations may help Microsoft speed the delivery of new Windows tablets by keeping tighter control over partners and accelerating development and testing. Though the program isn’t mandatory, the restrictions may impede chip- and computer makers from building a variety of Windows-based models to vie with Apple Inc. (AAPL)’s iPad, the people said. In past versions of Windows software, chipmakers could work with multiple computer manufacturers.

“Microsoft is still in the development process on the next version of Windows, continuing the engineering work with our silicon partners as part of the technology preview we talked about in January,” Microsoft said in an e-mailed statement. “We continue to talk regularly with hardware partners around the world as part of our development process.”

Sole Alliances

Under the plan being proposed by Microsoft, a given chipmaker would have to ally itself with a single PC manufacturer in order to qualify for certain incentives. Those may include features that ensure the device runs better or lower prices for the software, one of the people said.

Acer Inc. (2353) Chief Executive Officer and Chairman J.T. Wang, in an interview yesterday at the Computex trade show in Taipei, said Microsoft was trying to set limits on other companies. He didn’t specify the restrictions.

“They’re really controlling the whole thing, the whole process,” Wang said of Microsoft. “They try to set the game rules,” he said, and chip suppliers and PC makers “all feel it’s very troublesome,” he said.

This is the first time Microsoft has produced a Windows operating system that works with ARM Holdings Plc (ARM)’s technology, increasing the number of potential chip suppliers. The program seeking to pair one chipmaker with one computer maker might increase the chances of initial success by enabling the company to focus efforts on a smaller number of designs.

Design Limits

Still, the rules may constrain chipmakers’ ability to have their products featured in a range of devices. Computer makers whose designs aren’t chosen may be left out, one of the people said.

Under Microsoft’s program, chip suppliers will also be able to select a second computer maker for clamshell-style notebook computers that use the new operating system, one of the people said. Chipmakers for the new version of Windows, including Intel Corp. (INTC), Advanced Micro Devices Inc. (AMD), Nvidia Corp. (NVDA), Qualcomm Inc. (QCOM) and Texas Instruments Inc. (TXN), can also decline to be part of the program and work with whichever computer makers they want.

The program only applies to the version of Windows that’s being tailored for mobile computers, the person said. The regular version of Windows for desktop PCs will have no such limits, as with past versions of Windows.

Preview Tomorrow

Microsoft Corp. will preview the next generation of the company’s Windows operating system to clients and media tomorrow in Taipei, Steven Guggenheimer, a corporate vice president at Microsoft, said at the Computex trade show today.

Microsoft, the world’s largest software maker, has failed to gain traction in the market for tablets dominated by Apple, which develops the hardware and software that runs the iPad, introduced in 2010.

Acer was the No. 3 maker of PCs in 2010, according to researcher IDC. The company is among those hoping to boost sales by selling tablet devices, a faster-growing slice of the computer market.

The global tablet market will almost quadruple this year to 70 million units from 18 million in 2010, according to estimates in a May 17 report by Jefferies Group Inc. Apple will control about 64 percent of the 2011 tablet market, dropping to 41 percent in 2012, when 158 million units will probably be sold, according to the report.

Microsoft Chief Executive Officer Steve Ballmer said last week that machines with the new operating system, which he referred to as Windows 8, would be released in 2012.

Redmond, Washington-based Microsoft later retracted the comments, claiming they were a misstatement. The company is eager to expand Windows to computing devices such as phones and tablets, Ballmer said in a speech in New Delhi last week.

“We are in a race,” he said. “We are not doing that badly, frankly. We are doing pretty well in that race. But the race is on to continue to push Windows to a variety of new form factors.”

To contact the reporters on this story: Ian King in San Francisco at ianking@bloomberg.net; Dina Bass in Seattle at dbass2@bloomberg.net; Tim Culpan in Taipei at tculpan1@bloomberg.net

To contact the editors responsible for this story: Young-Sam Cho at ycho2@bloomberg.net; Tom Giles at tgiles5@bloomberg.net

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