by Roy Murdock | 04/24/2019

On April 18th, Microsoft announced the acquisition of Express Logic, a San Diego-based embedded software company, for an undisclosed sum.

Express Logic ships its RTOS, ThreadX, into hundreds of millions of devices yearly. The company has seen huge volume success in the mobile handset market over the past decade, powering low-end smartphones and peripherals such as baseband processors. Embedded engineers use ThreadX across a wide range of industries, including consumer electronics, automotive, industrial, aerospace – anywhere one can find a small MCU-based system.

Express Logic has built up a solid portfolio of tools and middleware to support its core RTOS offering, including embedded file system, GUI, networking, USB, and other solutions. More recently, seeing trends in the IoT and RTOS market, Express Logic created its XWare IoT Platform, bundling its RTOS with its middleware, IAR Workbench tooling, and cloud support for AWS, Azure, Google Cloud, and IBM integration.

This latest IoT Platform offering proved to be writing on the wall that the company was getting serious about bringing its MCU customers into cloud ecosystems. Acquisitions of close competitors Micrium by Silicon Labs in 2016 and FreeRTOS by AWS in 2017 had left Express Logic as one of the few, high-volume yet still independent MCU-targeted RTOS providers in the market.

The one question remained – who needed an MCU-targeted RTOS provider, and why? Would the overture come from a hardware company, a cloud company, an OEM, a systems integrator, private equity, or…?

Cloud Beats Silicon to the Punch
Microsoft put these questions to rest with a definitive answer – they are acquiring Express Logic to bolster their Azure IoT cloud offering. Microsoft has announced an investment of over $5B in IoT over the next four years. Its latest efforts in this arena have been focused around its Azure IoT cloud services portfolio as it moves resources and attention away from its traditional Windows Embedded/CE RTOS portfolio.

Satya Nadella has made it clear to analysts that, while the numbers might indicate otherwise, Microsoft is no longer a software company from a strategy standpoint. He has described his vision for the company as a builder of a “computing fabric” that allows customers and users to access what they need, when they need it. Much like the cloud services business model, rather than the traditional, licensing approach to selling software.

Footprint not Revenue
Consequently, when read from Nadella’s strategic perspective, it is obvious that the Express Logic acquisition is not meant to bolster Microsoft’s OS revenues (it would already be a drop in a much larger bucket dollar-wise). No, Microsoft is acquiring the company for the same reason AWS acqui-hired Richard Barry and brought FreeRTOS under its stewardship – to access the massive, billions-of-devices MCU market that is still relatively untapped for IoT cloud services.

Both of these companies know that the revenue they can generate by licensing RTOS’ is negligible, but the data generated by billions of MCUs (that is currently often checked manually, dumped after use, or simply not collected due to connectivity constraints) needs a place to live – a cloud datacenter where it can be stored, put to work, and monetized.

MCU Needed for Azure Sphere
There is another key factor that is likely driving this acquisition – Microsoft’s new Azure Sphere offering. Azure Sphere, announced in April 2018, is an Arm-based SoC featuring one Cortex-A processor and two Cortex-M processors built around SphereOS, a custom Linux derivative developed by Microsoft (only the second Unix-like OS ever developed by the company).

Microsoft will provide 10 years of SphereOS support, giving end customers of the SoC a “fully managed OS,” The company has not yet previewed Cortex-M programmability, but the end goal is for customers to bring their own RTOS onto the SoC to run in container-based sandboxes alongside SphereOS. Currently the company is seeing some uptake of Sphere in the home appliances and automation market, with a wider goal to roll out into any Internet-connected device that needs automatic security updating.

Before, Microsoft had expected customers to bring their own RTOS and invest in the expertise needed to get specific, low-level software up and running on its MCU. Microsoft’s Windows 10 IoT and legacy Windows Embedded/CE OSs are much too large and resource-hungry to run on a most MCUs.

Now, with ThreadX under its belt, Microsoft can offer a full Azure Sphere MCU out of the box. The company can add its own features to ThreadX and rely on the large developer pool and goodwill of one of the older and more-established commercial RTOS companies to help get its Azure Sphere offering kickstarted.

Also, providing ThreadX counteracts the inevitable customer conversation – OK we need to bring an RTOS to this platform, let’s look for something reliable but most importantly free…how about FreeRTOS? Although Microsoft representatives have stated clearly that FreeRTOS is an option to power the MCUs on the platform, it would be an awkward solution at best to have the MCUs generating and sending data to the AWS cloud while Microsoft only managed the updating and security through Azure cloud services.

Summary and Thoughts Going Forward
The logic of this acquisition is sound, and we congratulate both teams for putting together what we believe will be a winning strategy to pull together embedded MCU developers and cloud/IT teams through Azure Sphere. The company’s focus on security for this offering is also prescient.

One way Microsoft could bolster its Azure Sphere portfolio further would be to bring a free, open source MCU-targeted OS closer to the project. The Linux Foundation’s Zephyr offering is gaining traction, and could be a great addition to ensure the variety of RTOS’ supported meets the evolving needs of IoT developers. Alternatively, we would not be surprised to see Microsoft offering an open source, free version of ThreadX for developers to get started with.

View the 2019 IoT & Embedded Technology Research Outline to learn more.