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Is the Zune hitting the end of the road?


Sales are down and not catching the iPod

With all of the cuts at Microsoft, one product that seems is not getting much attention during all of this talk is the Zune music platform. Microsoft launched the Zune products to complete with Apple’s iPod products, and by the latest accounts Zune says are down, way down.

In the latest quarter, Microsoft revealed that the sales of Zune have fallen by close to $100 million, which is a 54 percent decrease in sales versus the same quarter last year. During the same period, Apple was able to grow iPod sales almost 3 percent, which translates into 22.7 million units sold during the same time frame.

While our moles tell us that nothing is final yet with the Zune, it is obvious that Microsoft will have to turn things around with the Zune platform in order to compete with the iPod. Could it be that Microsoft has another ace in the hole for the Zune platform to try before throwing in the towel?

We think it is possible that they could, as they have thrown a lot of money into the Zune platform and it just would not be worth it to dump it without trying to at least salvage something out of all of that work. Don’t be surprised if you see some of the Zune technology get cross-pollinated into some phone devices running Windows Mobile, as that might be one way that they could license the technology to generate revenue.

One other long shot possibility is that Microsoft might elect to license the Zune platform technology to third-party manufacturers, who in turn would be able to release new MP3 players that are powered by Zune platform technology. We don’t have any confirmation on this, but several in the know suspect that this could be what Microsoft is considering at the moment. Our question is would anyone really want to use a Zune-powered platform in their own devices where Microsoft has failed?

Last modified on 26 January 2009
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