Coup for ARM as group links up with Microsoft

The link-up means ARM's chip designs will feature in a new range of Windows-based products, including tablets and mobile phones, which are likely to hit the shelves in two or three years.

The deal is a coup for Cambridge-based ARM, analysts said, and will allow Microsoft to push into the high-end tablet market, which includes products such as Apple's iPad. ARM employs 47 staff at its base in Sheffield.

ARM saw its shares rally to a 10-year-high after Microsoft's announcement at the Consumer Electronics Show in Las Vegas.

Steven Sinofsky, president of the Windows division at Microsoft, said: "With the announcement, we're showing the flexibility and resilience of Windows through the power of software and a commitment to world-class engineering."

Microsoft also said other Windows-based products would continue to use chip designs from Intel. Gareth Evans, analyst at brokers Investec, said the significance of the deal for ARM was "hard to overstate" and marked a move away from Microsoft's long-standing partner Intel.

"The confirmation shows a determination on the part of Microsoft to compete seriously with Apple and Google Android-based devices in the tablet and portable device market," he said. "The new technology will eventually apply to a group of products, although it will be two to three years before ARM based products will be released."