According to this article, Microsoft is pestering Intel to produce low-power Atom-based, x86 processors for server machines.

I am wondering why they would force this direction. Do they know server requirements better than Intel? Why do they think that low-power x86 server chips are so important?

I believe the answer comes from the following factors:

Power efficiency is becoming more and more important in the server room. Intel processors (Microsoft’s home turf) have less than stellar watt/performance efficiency but they are the best in raw performance / cores.

ARM provides the best watt/performance in general computing (far far better than Intel x86) and ARM is seemingly scalable to the server performance range (with multiple cores and coming to 28nm high-performance production processes)

Microsoft doesn’t have a server operating system presence on the ARM architecture. Linux on the other hand runs on ARM, has optimized distributions for ARM SOCs.

ARM licensees are actively pursuing server chips (Nvidia, Nufront…etc)

If 4-16 core ARM server processors appear in the near future, servers built with them would have superior watt/performance ratios so they may quickly gain acceptance.

These systems would be perfectly served by Linux distributions (Red Hat, Ubuntu, Suse) and Microsoft could not offer anything for them. Linux is already the strongest player in the datacenter and this would grow its market share considerably while reducing the market-share of Windows simultaniously.

Even if Microsoft manages to create a stable Win8 server OS solution with all the required additional Windows sw (database systems, application servers…etc) on ARM in 2-3 years, it will be pretty much too late. They will need to play catch-up with Linux. The Microsoft Win8 solution will have to sell for peanuts to be in the game which would make it very much unprofitable in the short-medium run. Moreover, as x86 server market share goes down, their x86 Windows Server OS profits also go down.

All in all: If ARM processors appear in the market in the near future, Microsoft may face a steep uphill battle in the datacenter. If x86 based Atom server can slow down the onslaught of ARM servers, Microsoft may gain enough time to come up with a Win8/ARM server solution and avoid serious loss of server market-share.