The technology industry's most lucrative partnership—the long-running alliance between Microsoft Corp. and Intel Corp.—is coming to a day of reckoning.Sales of tablets, smartphones and televisions using rival technologies are taking off, pushing the two technology giants to go their separate ways.
The clearest sign that their interests are diverging: Microsoft on Wednesday is expected to unveil a future version of the company's flagship Windows operating system that runs on microprocessors designed by Intel rival ARM Holdings PLC, according to people familiar with its plans.
Microsoft still plans to make versions of Windows that also run on Intel chips, but the company's ARM plans amount to a huge bet on a chip technology that has become the de facto standard for smartphones, tablets and other mobile products.
The marriage of Intel chip designs and Windows—what became known as the "Wintel" alliance—has shaped the PC business since the early 1980s, defining the standard for which software developers created applications. But both companies have struggled to capitalize on newer growth markets.
While Windows still powers more than 90% of global personal computers, research firm Gartner says Microsoft software ran less than 3% of smartphones in the third quarter. Despite pushing tablets for the past decade, no Wintel tablet has caught on with consumers.
The success of Apple Inc.'s iPad has driven a deeper wedge between Microsoft and Intel. The two companies, in collaboration with hardware makers, haven't been able to come up with any tablet products that match the performance, power efficiency and ease-of-use of the iPad, a worrying trend as the Apple device has come to nibble into mobile PC sales.
Microsoft Chief Executive Steve Ballmer will kick off the Consumer Electronics Show in Las Vegas Wednesday. The new version of Windows Microsoft is expected to show off there will be better suited to touch-screen interfaces and the power limitations of tablets, people familiar with the matter said.
Technology industry veterans say the move by Microsoft is a milestone in the slow decay of the Wintel alliance. "I think it's a deep fracture," says Jean-Louis Gassee, a venture capitalist and Silicon Valley executive.
A Microsoft spokeswoman declined to comment. Bill Kircos, an Intel spokesman, said the relationship between the two companies is "deep and strong."
"While we can't comment specifically on any future Windows plans, there is a tremendous business opportunity for both of us in the projected billions of devices, gadgets and machines going online in the next five years, above and beyond the more near-term tablet area," Mr. Kircos said.
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