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Microsoft Corporation Gains a Key Ally in the Internet of Things

In February, Microsoft announced a free version of Windows 10 for the Raspberry Pi 2, a popular credit card-sized computer which costs $35. Microsoft recently followed up to that announcement with a partnership with Qualcomm , which will also bring a free version of Windows 10 to the DragonBoard 410c board computer.

Source: Microsoft

Therefore, the future of Microsoft's commercial cloud business -- which achieved an annualized run rate of $5.5 billion as of last quarter -- partially depends on its ability to expand its IoT market presence.

What the IoT means for Qualcomm

Qualcomm is the largest smartphone chipmaker in the world, but it has been expanding into other new markets like microservers , board computers, wearables, and IoT devices.

Qualcomm's IoT strategy is built on the foundations of its mobile chip and baseband businesses, which have a presence in a wide array of industries, including health care and smart cars. Qualcomm does not disclose its IoT revenue separately, but its interest in the market is obvious. Last year, it announced plans to acquire CSR , an electronics company which specializes in Bluetooth, wireless, and automotive infotainment services, for $2.5 billion. It also launched its Qualcomm Robotics Accelerator, powered by start-up accelerator TechStars, which will help start-ups develop robotics and IoT devices. That initiative directly relates to its AllSeen Alliance.

However, Intel -- which Qualcomm marginalized in the smartphone market -- also has big plans for the IoT market. Last year, Intel launched a dedicated business unit for IoT tech. That unit now houses tiny system on chips (SoCs) designed for IoT and wearable devices. There is Curie, a button-sized module that can quickly add Bluetooth connectivity to wearables. Edison, a beefier SD card-sized computer, can quickly connect devices to the Internet and each other. The unit has posted healthy growth -- last year, Intel IoT revenue rose 19% year-over-year and operating income climbed 12%. In response to the AllSeen Alliance, Intel, Samsung , and Dell co-established a new IoT group, the Open Internet Consortium, to develop rival communication standards for IoT devices.

Intel's button-size Curie module. Source: Intel

This focus on the IoT market is troubling for Qualcomm, since Intel can leverage its dominant market share of the server and PC markets to promote its IoT chipsets. Intel could also start subsidizing OEMs with free samples and financial assistance to grow its IoT market share, just as it did with its mobile OEM partners .

A win-win situation

Microsoft's dedication to ARM-licensed chipsets is a win-win situation for all parties involved. Microsoft extends its reach from the PC and mobile market into IoT devices, ARM's licensees get a new OS, and Qualcomm's board computers could gain more mainstream attention. Those benefits will not be felt overnight, but they could firm up foundations for these growing IoT businesses.

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The article Microsoft Corporation Gains a Key Ally in the Internet of Things originally appeared on Fool.com.

Leo Sun has no position in any stocks mentioned. The Motley Fool recommends Cisco Systems and Intel. The Motley Fool owns shares of Qualcomm. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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