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Microsoft Zune will fail, analyst predicts

Stark assessment of 'underwhelming' player

An analyst last night labelled Microsoft's Zune music player "underwhelming", and said it is unlikely to dent Apple's share in the market.

In an extensive briefing document received by PC Advisor's sister title Macworld, American Technology Research analyst Shaw Wu described Zune as "more bark than bite", reiterating his confidence in Apple stock.

He points to recently revealed images and specifications of the Zune, which have been made available through regulatory filings, required before Microsoft can bring the Toshiba-manufactured device to market.

The device is expected to cost $300 (about £160). It's also expected to host a 30GB hard drive and to include Wi-Fi capabilities and an FM tuner.

The inclusion of wireless capabilities is likely to be an Achilles' heel for Zune, Wu states. "While we find Wi-Fi a nice feature, we believe that Wi-Fi power requirements are still quite steep and so we are sceptical that battery life will be strong on Zune. Our analysis indicates three to six hours of battery life against 10 to 14 hours on a typical iPod," he writes.

Microsoft has hinted that the player will feature an 'all-new' design, but what's known so far is far from that, the analyst said.

"From our analysis, it appears that the Zune is essentially a repackaged version of the Toshiba Gigabeat, which has seen limited success. Moreover, the software is similar to the Windows Mobile OS licensed to its hardware 'partners'. At this point, we believe this could end up being another classic case of overpromising and underdelivering by Microsoft," he observes.

He's also critical of the player's iPod-like clickwheel, which he derides because it does not scroll through tracks and isn't sensitive to touch – he thinks this will make navigation difficult. "We find it interesting Microsoft also opted to replicate an 'iPod look' like most others, but failed to replicate one key piece of the unique iPod experience with its scrolling clickwheel and powerful database engine. We believe this key 'look and feel' feature may be difficult to replicate without infringing on Apple's extensive patent portfolio."

While Apple may be safe for now, Wu warns that other manufacturers of Windows-compliant devices may face more challenges, speculating that the Microsoft player may cannibalise the already relatively slim sales of devices from the likes of Creative, SanDisk, Sony, Toshiba, Samsung, iRiver, Archos and others.

"We view Microsoft's entrance into portable media hardware as like a civil war, much like if it entered the PC hardware market to compete with partners Dell, HP and Lenovo," he writes.

He also predicts that Apple will deliver a significant upgrade to its iPod range, perhaps as soon as September.

The analyst also warns that Microsoft's foray into the market may prove to be an expensive, money-losing strategy, much ilke his analysis of Microsoft's PlayStation competitor, the Xbox, which he calls a "financial failure".

On this he writes: "We believe Xbox has been a failure financially, costing Microsoft and shareholders billions in losses with profitability likely a few years away, if at all. If it were any [other] company, we believe the Xbox would have been shuttered due to its high unprofitability.

"We believe Microsoft's effort in portable media will likely result in similar economics."

Finally, Wu warns Apple competitors that they are dealing with a product and service that carries its own cultural imperative. "We believe iPod and iTunes is positioned to be the Walkman of the portable media space. Walkman maintained its dominance over a 15 to 20 year period despite countless competitors trying to create a 'Walkman killer'."


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