Nvidia thinks Microsoft's Windows CE is still a better choice for smartbooks, mainly because it's a more mature operating system, and because it has a better user interface.

Mike Rayfield, general manager for Nvidia's mobile business unit, also confirmed CEO Jen-Hsun Huang's predictions that Tegra could account for more than half of Nvidia's business in just a few years. At this point Microsoft is one of the biggest Tegra clients, as it will apparently use it in its upcoming Zune HD player.

"Microsoft hasn't confirmed that ... so until they comment, I can't," says Rayfield, but it seems to be a done deal, although it's not official just yet.

Another interesting tidbit is that Nvidia is working with Microsoft to optimize Windows CE and Windows Mobile for Tegra. A few weeks ago Microsoft confirmed that it would not port a desktop version of Windows for ARM CPUs, and it seems this is the only way to go.

Nvidia favors Windows CE over Android because it's a "rock-solid operating system that has been shipped billions of times."  Windows also offers a more familiar UI which will make more consumers feel at home on their smartbooks.

Also, Android handles video and graphics through the system's Java code, and it's just too slow for HD video. In spite of some drawbacks, Rayfield says Nvidia is also working with Google to develop a Tegra friendlier version of Android, but he doesn't expect Tegra-based smartbooks running an optimized version Android to hit the market in about a year.

More here.