Microsoft is to launch a new version of its Windows operating system that will be compatible with chips designed by Arm, opening a lucrative new avenue for the Cambridge-based technology firm.
The Seattle-based software giant, which is keen to mak a mark in the growing market for tablet computers, has so far opted to side with Intel,the American semiconductors group.
But Arm, whose FTSE 100-listed shares jumped 13 per cent when the announcement was made at the Consumer Electronics Show in Las Vegas, is a leader in the market for the kind of high-powered, low-battery chips that feature in smartphones and tablets such as Apple's iPhone and iPad.
The move had been expected, and market speculation ahead of the news had driven Arm's shares to a nine-year high in late December. Its shares have gained nearly 30 per cent in the past three weeks.
City analysts also welcomed the news, though some warned that Arm's shares, which closed at 482p, up 10.6p, or 2 per cent, were looking expensive.
"Windows only runs on Intel's x86 chip technology but the hopes of ARM fans were raised back in July, when Microsoft bought an Arm licence for the first time," said Paul Morland of Peel Hunt. "This confirmation is a major boost for Arm in its battle with Intel, but is unlikely to impact numbers until late in 2012."