1. It will hurt its close partner, Intel Corp.
Intel is fighting back against ARM's attempts to move upmarket from smartphones into netbooks, which would further cannibalize Intel's PC chip sales.
Earlier this month, Intel recruited Taiwanese chip foundry TSMC to design Atom chips that could work in smartphones, ARM's current strength.
"Intel really wants to get into both markets; Microsoft really needs to stay out," Castellano said. If Microsoft ports Windows XP or 7 to ARM, Castellano envisions retaliatory moves from Intel, such as actively optimizing its x86 CPUs to run Linux better than Windows.
2. Technical difficulties.
Microsoft has successfully brought Windows out of mainstream PCs to embedded platforms before. Windows Embedded Standard is a port of Windows XP. Its offshoots, such as WEPOS (Windows Embedded for Point of Service) are hugely popular for kiosks and electronic cash registers. It's even ported the weighty Windows Vista to embedded PCs with a version called Vista Business Embedded.
The difference, however, is that those ports were still for devices running x86 processors. Doing a real port of XP, Vista or Windows 7 to a different platform such as ARM would be a technical "nightmare," according to independent analyst Jack Gold.
"Windows takes a pretty substantial amount of processing power, and it's not clear that ARMs deliver enough," he said. Also, "ARM processors run completely different from x86 ones. The instruction sets are different; the drivers are completely different."
Gold concluded, "It's an incredible challenge, and Microsoft has got enough on their plate."
Castellano agreed, saying that many of the strengths shown by ARM devices -- their low energy usage and quick start-up -- would disappear if they ran Windows.
"How many processes need to start up on a PC before you can start to interact with it? All of that comes with Windows," he said.