Years late, Microsoft is going to war with Apple over the corpse of its shrinking iPod business as Redmond has reduced its already comparatively low Zune HD prices.

The 16GB Zune HD has dropped in price from $220 to $190, and the 32GB Platinum Zune HD has fallen from $290 to $250.This does give the Zune the price edge over over the iPod touch with the 32GB Zune HD now $50 less than the 32GB iPod touch, and the 16GB Zune HD $10 less than the 8GB iPod touch.

The Zune now offers twice the storage of the 8GB iPod touch for $10 less but we are not sure if the price cut will do much.

Still, Zune wipes the iPod touch on paper anyway as it has a 3.3-inch OLED touchscreen display and an Nvidia Tegra system-on-a-chip. However Redmond has not dented in Apple’s dominance over the MP3 player market.