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Can't Find The 80-Gbyte Zune? Here's Why

The shortage is more likely caused by a miscalculation on Microsoft's part than on high demand, iSuppli said.
The 80-Gbyte model of the Microsoft Zune portable media player is in short supply or backordered at many popular retailers, a market research firm reported Wednesday.

The shortage is more likely caused by a miscalculation on Microsoft's part than on high demand, iSuppli said. "Given the widespread criticism of the first Zune model, it is likely Microsoft erred on the side of caution when placing initial orders for the new Zunes, which include the hard-disk-drive-based Zune 80 as well as the flash memory-based Zune 4 and 8," iSuppli analyst Chris Crotty said in a statement.

The original Zune, when compared to Apple's market-leading iPod, was found by many critics to be lacking in design and ease of use.

Recent media reports suggested that the Zune, which has failed to make a dent in Apple's market share, is outselling iPods on Amazon.com. ISuppli, however, discounted those reports saying, they referred to a sales spike for the older, deeply discounted 30-Gbyte Zune model.

In fact, Microsoft has been "surprisingly non-aggressive" in its approach to the market for portable media players and MP3 players, iSuppli said. The company, for example, waited nearly a year before upgrading the original Zune and releasing the first flash-memory-based units to compete in the lower-end of the market. Microsoft has the resources to move faster, and there was no shortage of components from suppliers, the research firm said.

In addition, when the Zune 80 was finally launched, it mostly matched products shipped by rivals earlier in the year, iSuppli said. Microsoft also has taken longer than expected in adding more video content to its online Zune store. The new Zune's large screen for showing video has been a key selling point for the device.

"They seem to be feeling a little gun shy about the market, which they've approached in a very tentative way," Crotty told InformationWeek.

Microsoft's lack of aggression is surprising because of the size of the PMP/MP3 player market, which is expected to reach $19.5 billion worldwide this year, according to ISuppli. Vendors are expected to ship 211.5 million units. ISuppli defines a PMP as a music player with a large screen for video playback. Those devices are expected to account for 66% of the market in 2011, up from 38% this year, according to iSuppli.

With the Zune, Microsoft is trying to beat Apple using a similar strategy as the computer maker. Both companies have built online stores that sell music and video tied to their players, which means the content is not compatible in its native form with other products. Such a closed-system makes it less likely customers will switch as they buy more products.

The Zune, however, remains less of an "iPod killer" than a threat to non-Apple competitors, iSuppli said. SanDisk, however, is becoming a stronger rival to the Zune as one of the few PMP sellers to gain market share steadily in the U.S. and worldwide markets. The company has combined a strong product line with several key strategic advantages, including a solid supply of flash memory, proven retail distribution, and savvy partnerships with content providers, iSuppli said.

During the first three quarters of the year, SanDisk's share of worldwide player shipments has grown to 2.2% from 1.5%, according to iSuppli. Apple has remained nearly steady with about 25% of worldwide shipments.