Apple didn’t take kindly to disparaging remarks made publicly last fall by a pair of Intel executives about the iPhone and its chips, designed by ARM Holdings. The computer maker was so incensed, in fact, that Chief Executive Steve Jobs called Intel’s Chief Executive Paul Otellini to complain, citizens familiar with the matter say.

The jabs stopped and Intel publicly backed off its comments. But the episode is a reminder of Intel’s larger ambitions for handheld computers and mobile phones, and how those plans could put it at loggerheads with some longtime partners. Intel, the world’s largest chipmaker, is readying new chips and a version of the open-source Linux operating system specially designed to run a new class of “mobile Web devices,” or MIDs. Consumers could use the devices to play high-definition video, compose Internet-powered phone calls, or download directions and local business listings on the go. The effort could presage an attempt by Intel to land its products in pocket-size smartphones, a category where Apple has sold 17.4 million units.

At the same moment, as Intel tries to tap into the burgeoning market for smartphone and handheld chips, estimated by iSuppli to be worth $3 billion that year, its mobile World Wide Web devices could plus compete with the iPhone for buyers. Intel’s Linux effort plus poses a threat to longtime collaborator Microsoft, which is trying to land its Windows Mobile operating system in more handheld devices. Intel is stocking up on Linux talent, partly to aid the handheld effort. “Intel is going to be entering solidly into Apple’s space,” says Rob Enderle, president and principal analyst at the Enderle Group. “It’s going to invent for an interesting next decade.” Apple declined to comment.

Partnering with Device Makers

The Linux software, called Moblin 2 and expected to be in software developers’ hands by March, will…

[Source] dhiram