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Microsoft Challenges Apple -- Intel Wins

NEW YORK ( TheStreet) -- In reaction to Apple's (AAPL - Get Report) stunning new dominance of the "PC market" with the iPad tablet, Microsoft (MSFT - Get Report) has a cunning plan. It's going to blur the lines.

What Windows 8, the coming version of its operating system, is all about is having one OS that runs on a desktop, a laptop, a tablet or a phone. With its Metro interface, designed for touchscreens, the idea is to challenge Apple's citadel directly from the Microsoft castle.

Guess who the winner is most likely to be? Intel (INTC - Get Report).

Intel

Intel's latest chip, dubbed Ivy Bridge, is aimed at mobile and gaming markets. It uses much less power and handles graphics much better than earlier designs.

Most analysts are comparing it favorably to what long-time rival AMD (AMD) offers, but I suspect Intel has a bigger goal here.

The fact that "fab-less" companies -- firms that design but don't make their own chips -- like Nvidia (NVDA) and (now) AMD have been eating Intel's lunch for years must hurt. The fab-less win by getting closer to customers, by designing around their needs, and by making custom runs for specific products, rather than by expecting product makers to design around their latest-and-greatest.

Their greatest success has been among Chinese OEMs, for whom they deliver complete designs, with sell-through guaranteed, rather than just chips and software.

But what if there were just one OEM to please?

The Apple iPad presently uses a Samsung-made chip based on ARM technology. The design is built around power efficiency, and the heart of the new iPad is its snazzier graphics, perfect for gaming.

For Apple, the problem with that is that Samsung is a direct competitor. The two companies face off all the time, not only in stores but also in court. Samsung has risen in power thanks to its embrace of Google Android, and Apple hates Android with a passion.

Meanwhile, Intel is interested in becoming a foundry for Apple and Intel is already producing the central processor for Apple's desktop Macintosh line.

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