Microsoft's Zzzune (The Sound Of iPods Flying Off The Shelf)

The 30-gigabyte Zune player from Microsoft (MSFT), which retails for $249, was on the Top 10 list at Amazon.com, the largest Internet retailer, for several days after its release 11/14.

By 11/27, the most popular model of the Zune, the black version, was at No. 76 while 7 of the Top 10 products were digital media players. The Top 10 players included six Apple iPods including the 30-gigabyte iPod which is identically priced as the comparable Zune at $249. Also on the Top 10 list was one MP3 player from SanDisk.

After its launch, Zune sales "met expectations" according to Microsoft. The real issue may be matching the amount and ease of use and re-use of media from the iTunes store. The gap is wide. Or is it that the Zune is noticeably heavier and has a shorter battery life? Its screen is bigger and it has a cool wireless feature but to date, it has not garnered the hip quotient to match the sleekness and consumer embrace that the iPod has achieved.

Let's look at what matters -- the data. One only needs to glance at a three month indexed stock chart comparing the two firms:

Zune is not material to overall revenue for MSFT. My thesis: it will continue not to be, and the performance gap the chart depicts and doesn't require our quantitative skills to ascertain, will continue.

Disclosure: Clear Asset Management is long Apple Computer Inc. (AAPL) in the Clear Large Cap Growth portfolio.

Comments

[carleast:]

I have to say that I do find it really hard to believe how bad at getting it right with hardware product Microsoft are. It's not as if they actually come up with bad technology or bad products. It's just that they don't seem to do their research well enough. In fact to be honest if Windows wasn't so well entrenched and marketed and their were alternatives then I doubt they would even play that one right.

There are obviously some people at Microsoft getting paid an awful lot of money but are just not performing their jobs properly. For a start they often don't listen to what the analysts say about the products. And while I'm sure they do a lot of market research you have to realise that market research is often clouded in the technology market. You get the old "oh yeah that's a great idea" answer that when the person really finds out more about the product (quite often they won't be able to do side by side comparisons with competing products) then they don't like it as much.

Microsoft have a great deal of money burning holes in their accounts but if they continue to bring our duds like this then it won't last long. And they're guaranteed to get burnt by the PS3 and Wii so there's another failure. Add to that the ever increasing presence of Google in the software stakes and I think Microsoft should think twice about falling asleep on their throne.

2006 Nov 30 06:10 AM

[Mark Dannau:]

Microsoft Zune in the ten best??? Last time I looked (5 minutes ago) the Msft Zune was in the 59th position of the Amazon bestseller list, not in the 10 first. Aren't you trying to make some hype around a product that is even passed by small MP3 player manufacturers like Sandisk? The only reason the zune will sell well is because Microsoft's marketing army is behind it. But that will only last the time people get a real eye on the product itself. Maybe in the next upgrade of the Zune or the Zune II they'll really will make a worthwhile product but for the time being, they're bound to float even lower than the 59th rank.

Mark

2006 Nov 30 07:18 AM

[carleast:]

I don't think you read the article properly Mark. It says that the Zune was in the top ten for several days after it's release but as of the 27th Nov it was down to 76.

2006 Nov 30 10:02 AM

[Michael Com...:]

The Zune is a repackaged Toshiba Gigabeat. It's a joke!

2006 Nov 30 05:27 PM