AMS is right to highlight Microsoft. I recall an announcement some time ago that the mobile Windows-in-ROM (whatever it's called this afternoon) would be developed only for ARM and not for x86.
Note also that the desktop market is moribund this year, with only laptops shipping in quantity worldwide. Seems to be a trend.
All this leaves Intel with two specific market openings away from their traditional heaters:
1. Sub-notebooks and handhelds running ROM Windows on ARM. Sub-notebooks are probably the area where XScale can make the most impact.
2. Laptops running Windows XP on x86. Video decoding or gaming without roasting the lap underneath or running the batteries flat while Frodo is still stuck in the dead marshes is the name of the game here.
It all makes more sense than Intel's strategies have for a very long time, IMHO. I notice they are even incorporating AMD's 64-bit instruction set extensions in their new dual-core kettle brewers. Watch their share price next year.