Intel: Not Inside Microsoft's New Phones

BARCELONA (TheStreet) -- First it was the snub by Apple (AAPL). Now Intel's best friend, Microsoft (MSFT), has shifted its storied allegiance, opting to use Qualcomm's (QCOM) chip for its new Windows Phone 7 smartphones.

Microsoft's big announcement at the Mobile World Congress tradeshow in Barcelona Monday was bad news for Intel. Microsoft's list of mobile phone tech partners include AT&T ( T), Deutsche Telekom ( DT), Verizon ( VZ), Sprint ( S), Vodafone ( VOD), Dell ( DELL), HTC, Hewlett-Packard ( HPQ), Samsung and Qualcomm.

Intel wasn't mentioned.
Intel

"Qualcomm is the only chip vendor qualified for the new Microsoft mobile OS launch," wrote Morgan Stanley analyst Ehud Gelblum after discussions with the companies at the tradeshow. All eight of the phones expected to arrive before Christmas "are being designed on Qualcomm's Snapdragon chips," Gelblum wrote in a research report Wednesday.

This is the second major win for Qualcomm, as first Google ( GOOG) picked the Snapdragon chip for its Nexus One phone.

For Intel, the rejection by Microsoft comes a month after TheStreet first reported that Intel missed the cut on the Apple iPad. The shutout from the high-profile Apple iPad means Intel is poorly positioned in the closely-watched emerging tablet market.
iPad

The Mobile World Congress show wasn't an entire loss for Intel, however.

The chip giant did manage to secure a partnership with Nokia ( NOK) on a line of smartphone devices. The two companies announced the product plan, under the name of MeeGo.

Intel is also a big beneficiary of the PC market's rebirth. Consumers, put off by Microsoft Vista, are now opting for desktops and especially notebooks running on Microsoft Windows 7.

But investors are a forward-looking lot, and the future of computing isn't so much in PCs.

Mobile device sales have been exceeding one billion units a year, according to research firm Infonetics, and smartphones are the fastest growing segment within that market. Mobile devices are one of the few high spots in a tech market submerged by spending cuts.

Intel is falling on the wrong side of that trend.

-- Written by Scott Moritz in New York

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