A couple of analysts have pretty much stated the obvious, saying that Microsoft would be better off if it dropped its Zune series of media players, as it has simply failed to make a dent in Apple's iPod market share.
IDC analyst Susan Kevorkian believes that Microsoft has already missed its opportunity, saying: "If Zune were going to make a strong move against the iPod, it already would have". And IDC study found that just 5 percent of PMP users owned Zunes, while a whopping 61 percent were hooked on iPods. "That's not to say the game is over, it's just not likely that Microsoft is going to beat Apple at its own game," says Kevorkian.
"The market reception for Zune is so disappointing that many
retailers have even stopped selling it altogether," said George Kurian, VP at Tradition Capital Management LLC. "Microsoft should abandon Zune and follow Apple's strategy to try to
make its presence felt in the high-growth smartphone sector".
Looking at the numbers, it's not hard to see why Zune isn't looking like a winner. Revenues of Microsoft's Entertainment and Devices unit have dropped 42 percent in the last quarter, to $211 million. Apple has also seen a drop in iPod sales, but it was just 18 percent, and let's not forget many iPod users are dropping them in favor of another Apple product, the iPhone.
While the Zune business accounts for only a tiny portion of Microsoft's revenue, one company that stands to lose in case Zune is abandoned is Nvidia, as the recently announced Zune HD is the first big design win for its Tegra processor. For Nvidia it's not just a matter of losing a bit of business, but rather prestige and credibility. It simply needs strong partners like Microsoft and Samsung to make Tegra a success and speed up adoption among other vendors.