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Wednesday, July 05, 2006, 04:00 pm PT (07:00 pm ET)

Microsoft plans wireless iPod rival by Christmas

Microsoft will start selling a wireless digital music and video player to compete with Apple Computer's iPod by Christmas, Reuters is reporting.

Sources close to the matter told the news organization that Microsoft has been touting the device to record companies in the last few weeks.

The new player will reportedly let users download music and videos over the air, a feature that could give it an edge over the iPod.

Microsoft has also been showing a software package similar to iTunes.

According to the report, the Redmond, Wash.-based software giant plans to build a digital ecosystem similar to Apple's iPod + iTunes model, in which it controls all the technology.

Sources told Reuters that record companies should begin receiving prototypes to test in the coming weeks and that Microsoft plans to throw "significant marketing dollars behind the launch."

In a report last month, Reuters cited sources in saying Microsoft was laying the groundwork to compete against Apple's iPod digital music players and iTunes service with "an entertainment device that plays videos and music."