It is as you say Microchip Manny, but maybe to be differentiating these days companies have to design the hardware to run the software.
The consumer customers don't care who designed which bits, but they want a smooth and satisfying experience - like Apple used to provide, but have struggled with recently.
Microsoft will continue to be known as software company, or a games console company...but it doesn't stop it putting hardware engineers to work, legs paddling like mad under the surface of the water, to try and create a better, differentiated set of products.
Although most of us engineers got into the profession for the joy and excitement of creating and working with the leading edge technology, we should also read some business books in addition to technology books. One such book that I read called "22 Immutable Laws Of Marketing" should be circulated at Microsoft. Shoot they are mentioned in the book. Changing Microsoft from a software company into a hardware company will be hard and maybe even impossible at this late stage in the game. As mentioned in the book, it is not that Harley Davidson could not make a good automobile, but the name is SO associated with motorcycles, for better or for worse. The same is true of Microsoft, they will always be viewed as a software company primarily who happens to do some hardware. But their hardware is ALL really "me too" hardware as they provide nothing that is unique on the hardware front. I will be curious to see how this plays out, as I was part of the team at Qualcomm when they got their ARM architectural license and it was anything but smooth...and Qualcomm IS a hardware company!
MS did hire computer architect Marc Tremblay from Sun (pre-Oracle acquisition) a year ago. So they must have desires to provide their own optimized designs, maybe not market their own chips but have others do so for (e.g.) Windows Phone 7 devices.
I guess Microsoft want to update ARM CPU to add windows phone specific instructions and accelerators so that it can improve the device performance. And finally bundle the OS and CPU together and sell to mobile phone manufacturers. This way MS can dictate HW on the device to some extend and would be competitive advantage over android.
I doubt that "Apple-envy" is the most significant factor here. The real "fear factor" is more likely Google. Between the rise of Android (almost 100% on ARM-based processors), and the soon to be released Google Chrome OS, Microsoft is being attacked on all sides. The company is desperately in need of success with Windows Phone 7, just to hold onto 4th place in mobile OS. Now Google is also getting ready to attack netbooks, the fastest growing segment of the PC market. With Intel focusing on MeeGo, and also lacking success in the smartphone market theselves.. Microsoft has no choice but to expand their hardware platform options.
I suspect the architectural license is motivated by a desire to make next-gen Zunes and Kins to compete with Apple and establish its mobile software...i.e. to create a Microsoft version of the A4.
Windows on PCs and servers is something I suspect Microsoft will explore but resist for many more years.
Do you see SoftARM being a collaboration that can grow to rival Wintel? And how does this make Intel feel?
Many ARM advocates loved the idea of avoiding Wintel and wanted to run open-source everything on ARM processors. Will a SoftARM axis be seen in a positive or negative light by users, investors?