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Microsoft Zunes Further Into Oblivion

It's hard to see where Microsoft thinks it's going with Zune, part of the Entertainment and Devices Division that continues to tread water as the also-ran of the company's five main divisions.

It's hard to see where Microsoft thinks it's going with Zune, part of the Entertainment and Devices Division that continues to tread water as the also-ran of the company's five main divisions.Zune also represents a lost opportunity for Microsoft to do something really smart, which would be to make a Zune phone. You know, something that lets you listen to music, play games and communicate with people. There's a company called Apple that has a device that does those three things.

Why Microsoft maintains it only needs two legs of a three-legged stool is anyone's guess. Maybe it's because Microsoft is "not trying to play copycat," as Zune group product marketing manager Brian Seitz told Ars Technica.

By the way, the new Zune DH that Microsoft will introduce next week does not come equipped with an HD touchscreen, as its name implies (the HD refers only to the HD radio, which is a novel feature). Zune HD will include an organic LED 16:9 touchscreen with a resolution of 480x272, full Web browser, and an embrace of Xbox Live and the Xbox Live Video Marketplace.

Incredibly, Microsoft believes this puts it in the same league as Apple. Chris Stephenson, general manager of global marketing for Microsoft Zune, told CNET, "this device is created to go head to head with the iPod Touch."

Hard to swallow? Try impossible to swallow.

Put aside for a moment that Zune is the modern version of putting coal in a kid's Christmas stocking when they were expecting an iPod. It flies against everything we're seeing about portable devices, which is that they need to consolidate at least telephony, Internet browsing, email and music. How many devices does Microsoft think we want to carry around in our pockets?

Moreover, Microsoft is putting enormous efforts behind the Zune Marketplace that, notwithstanding any strengths it could bring to the table, fades into irrelevance because of the spectacular failure of the Zune.

Only two million Zunes had been sold as of May 2008, the last time Microsoft publicly announced figures... Meanwhile, nearly 200 million iPods have been sold, along with almost 18 million iPhones.

Not to worry, Steve Ballmer said Zune Marketplace "becomes a fundamental part of building a real business around TV sets."

So the market for Zune Marketplace is television? Television? We're in the 21st century, Apple is probably working on a device that combines telephony, browsing, email, and music with word processing and other business applications... and Steve Ballmer is talking about television?

For the record, Microsoft's Entertainment and Devices Division generated $1.5 billion in the last quarter, representing an operating loss of $31 million. Third quarter sales were down 2% year-over year and down 1% for the nine months ending March 31, 2009 compared with the nine months ending March 31, 2008.

In contrast, iPhone sales alone generated $1.5 billion for Apple in the last quarter (this doesn't include sales of iPhones or music or other software), and sales increased 19% for the quarter ending March 28, 2009 compared to the year-ago quarter. For the six months ending March 28, the trend is even stronger -- +103% compared to the year-earlier period.

What does Microsoft think is going to happen? People are going to start buying the Zune because you can spend less money filling it up with music than you could theoretically filling an iPod with much greater capacity?

Maybe Microsoft is planning to sell the Zune as the electronic embodiment of "less is more." That'll work.

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