Microsoft's Revamped Zune Still No Match For Apple iPod - InformationWeek

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Microsoft's Revamped Zune Still No Match For Apple iPod

Despite its better screen and improved wireless capabilities, analysts suggest Microsoft's second attempt at dethroning Apple still lacks innovation.

Microsoft unveiled its revamped Zune on Tuesday, introducing a smaller, sleeker device with a better screen and new wireless capabilities. In addition, the company launched Zune Social, an online community for music lovers, whether or not they own a Zune.

However, most experts agree that Microsoft's second-generation Zune is unlikely to have an impact on the success of Apple's iPod, and much more innovation is needed for the Zune to pose a threat to the market-leading digital music player.

Microsoft's new lineup includes an 80Gbyte Zune with a 3.2-inch display for $250. The flash versions include an 8Gbyte player for $200 and a 4Gbyte player for $150. The largest Zune is only available in black, while the others are also sold in pink, green and red.

Analysts on Wednesday welcomed the improvements Microsoft made, saying the new and improved Zune contains the baseline enhancements to hold on to customers and attract new ones -- mostly at the expense of iPod alternatives from companies like SanDisk and Creative. "By and large, it's not going to impact Apple at all," Van Baker, analyst for Gartner, told InformationWeek on Wednesday. "But it will impact the other alternatives to Apple."

That's because the iPod remains in a league of its own, accounting for more than 70% of the music players sold worldwide. While Microsoft has sold 1.2 million Zune devices since releasing it last holiday season, Apple between October 2006 and June of this year sold 41.4 million iPods, according to figures from each company, respectively.

In trying to build an iPod killer, Microsoft has been innovative in its use of Wi-Fi. The first version let people share music wirelessly, a feature not on the iPod. Due to negotiations with record companies, however, music shared would expire in a few days, and there was a limit as to how many times music could be shared.

The new Zune, which is scheduled for release in mid-November, will hold music from other Zune players indefinitely and will allow unlimited sharing. The original restriction of playing shared songs only three times on each Zune remains.

Besides loosening up the conditions on sharing music, Microsoft also has made it possible for Zune users to synchronize the device wirelessly with a PC. The Zune, however, can't buy music wirelessly from an online store, a feature Apple added to its new iPod Touch and iPhone.

Other Zune improvements included a reworked navigation button, and the use of flash memory, a form of storage with no moving parts that's sturdier than a hard drive and accommodates smaller devices. Apple also uses flash memory in some of its iPods.

While all the improvements are welcome, they only keep Microsoft in the game, analysts said. "They're going to have to do a lot more to compete with Apple, but at least they have the base-level stuff they need," Baker said.

Samir Bhavnani, analyst for Current Analysis West, agreed, adding that Microsoft needs to be more innovative. "If you look at what Apple has done in the last two years, and what they'll do in the next two years, then Microsoft will have to make greater advances if they're going to be a serious player," he said.

Microsoft's use of Wi-Fi, for example, shows some real innovation, but the company will need to push the technology further. "They've got to enhance that innovation, or find a new innovation that will set them apart from what Apple is doing," Baker said. "That's going to be tough because Apple is pretty innovative. They're a tough competitor to attack."

Among the innovations Apple introduced in September was a touch-screen iPod that could buy songs wirelessly from the iTunes music store. In addition, the company revamped its entire portfolio.

"They're still behind Apple, and there's not a single person in Microsoft who will tell you they're ahead," Bhavnani said.

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