Microsoft Cutting $500 Million From Budget; Is Zune on the Chopping Block?

[Jason Dunn]

<div class='os_post_top_link'><a href='http://seattletimes.nwsource.com/html/businesstechnology/2008314778_brier27.html' target='_blank'>http://seattletimes.nwsource.com/ht...78_brier27.html</a><br /><br /></div><p><em>"The latest models of Microsoft's digital music player are very nice, and the software's getting better. But the MP3 player market is fading, judging from Apple's latest earnings report. It said iPod sales fell 1 percent last quarter, and that was before the financial crisis. Meanwhile, the Zune still is fighting for a toehold. The growth now is in mobile devices that function as music players, phones and browsers. And to match the latest iPods, Zune needs costly upgrades: touch screens and a developer program. My guess is there won't be another generation of Zune hardware after the holidays; Zune software and Web services will be folded into other Microsoft offerings."</em></p><p>This is definitely not the first, or last, of the rampant speculation we'll see from journalists as they try to be the first to predict what Microsoft is going to cut (or cut back on) in order to trim the $400 to $500 million dollars from their budget as they said they would. Will the Zune get axed? I doubt it - Microsoft knows that there's money to be made in the MP3 player space, especially if those devices strengthen the eventual weakening of the Windows ecosystem as more and more of what we do on computers gets pushed up into the cloud. Devices matter, and the Zune is part of a larger overall ecosystem that's important to Microsoft.</p>

[Pony99CA]

What if Microsoft just folds the software into Windows Mobile and kills the hardware group?

Steve

[Janak Parekh]

What if Microsoft just folds the software into Windows Mobile and kills the hardware group? If I were them, I'd be very careful as to how to sell this. Otherwise, the press will jump on it as Microsoft having "lost" against the iPod.

Personally, I think they have too much invested to give up so quickly. But, we'll see.

--janak

[Pony99CA]

If I were them, I'd be very careful as to how to sell this. Otherwise, the press will jump on it as Microsoft having "lost" against the iPod.
True, but Microsoft could spin it as "We're focusing on converged devices like phones now." (Sort of like the iPhone.) Maybe they could even make a WM Classic device with the Zune software in it to compete against the iPod Touch. That might upset HP, but I don't know of any other OEM doing WM Classic.

Personally, I think they have too much invested to give up so quickly. But, we'll see.
I suspect you're right, but, just in case, my suggestion would at least preserve some of the Zune.

Steve

[Stinger]

What annoys me is the half-heartedness of it all. It's been how long since the Zune first appeared and it's still only available in two countries. Insane. Is Microsoft happy being a minor player?

I say either back the Zune fully or drop it.

[Craig Horlacher]

I would like a Zune like media player application on my windows mobile phone. It would be awesome if it could connect to the Amazon MP3 store.

[serpico]

Hopefully this $500 million is savings from not promoting Vista any longer now that Windows 7 is the flavor now coming out next Fall.

[USArcher]

Zune will be fine. But I do believe there will be a strong focus on making Zune available on Windows Mobile. I imagine $400 million will come from a reduction in the number of business acquistions it does every year and they probably need to look at consolidating the number of events they hold.

[Kacey Green]

I'll take the converged device when there is a phone that can hold all my smartphone/pda data and my whole music collection and all my podcasts and some of my videos

There's a reason the designed the Z80 and Z120

[Jason Dunn]

It would be awesome if it could connect to the Amazon MP3 store.

Pretty unlikely given that they have their own music store - they want to promote their own music store. I'd like to see someone make an Amazon MP3 store app for Windows Mobile...

[Phillip Dyson]

I think we'll see a mixture. Windows Mobile will serve to compete with the iPhone (WM Pro, maybe WM Standard) and iPod Touch (WM Classic).

The Zune player will stay to compete with the iPod Classic, and iPod Nano. Those devices will always have higher capacity relative to the Phone and PDA models.

[David Tucker]

eh, I'm not worried. The Zune is critical to MS's entertainment division. It ties in with its XBox and I think we'll see them become more closely related in the next year. Honestly with the coming release of Win7 I think we're going to see a resurgence in Windows popularity as their ecosystem really connects with itself.

[nook]

If you read the full text, you'll find that the areas where Microsoft made the most revenue, it was in two areas, software for the Mac, and the Zune!!! The profit margin in those areas rose 50%. So I think the Zune is here to stay, I hope.