Microsoft Corp said to plan new Windows OS for tablet devices

Microsoft plans to unveil a version of its operating software that runs for the first time on processors designed by ARM Holdings PLC, the Wall Street Journal and Bloomberg reported.

Microsoft intends to announce a version of its operating system to run on ARM chip architecture, which competes with the “x86” designs favored by Intel, the WSJ cited sources as saying.

It was unclear when such an operating system might come to market, but the company could claim lost ground in tablets and other battery-powered mobile devices by forging a new partnership with ARM.

Microsoft said, on Tuesday that more than 1.5 million cellphones carrying Windows Phone 7 operating software have sold in the first six weeks of launch.

Windows Phone 7 may be Microsoft’s last chance to establish a major presence in a hot cellphone market now dominated by Apple Inc and Google Inc, analysts say.

Microsoft’s disappearance from the phone market and its delayed response to tablet devices like Apple’s iPad has been seen as a drag on shares this year. Its shares closed up 26 cents on Tuesday at $28.07.

But Gillis noted that the shipment of 1.5 million phones was sales into the distribution channel, rather than directly into consumers’ hands, which tempers the announcement.

Taiwan’s HTC, Dell Inc, Samsung Electronics and LG Electronics are among the vendors who have launched or plan to begin selling Phone 7-based devices. The industry is closely watching the early days of what could be a longer-term driver of growth. Gillis forecasts about 25 million Phone 7 sales in 2011. In contrast, analysts expect Apple to sell more than 60 million iPhones next year.

Gillis noted that Microsoft is spending $500 million to market the Windows 7 smartphone, and suggested the company could see market gains by using some of that cash to subsidize the devices so consumers get them for free.