Get the Lowest Prices anywhere on Macs, iPads and Apple Watches: Apple Price Guides updated April 22nd


Microsoft's Zune said to be more bark than bite

Microsoft's upcoming Zune digital media player appears to be little more than a repackaged Toshiba Gigabeat player, which itself has enjoyed only marginal success, one Wall Street analyst says.

Recently, specs and photos of the highly-anticipated Zune device turned up through FCC filings and other industry sources, offering industry analysts and pundits alike a glimpse of what Microsoft has in store for this year's holiday shopping season. However, few have are impressed with the device.

"While we have great respect for Microsoft, we are frankly underwhelmed by the much-hyped Zune device," American Technology Research analyst Shaw Wu told clients on Wednesday. "It appears that the Zune is essentially a repackaged Toshiba Gigabeat that has seen limited success."

In a research note, Wu said Zune shares similar characteristics to other would-be iPod knockoffs, which have so far failed to chip away at Apple's dominant share of the digital media player marker.

"Like the Chocolate phone from LG and other vendors, the Zune includes a fake click-wheel that does not scroll nor is touch pressure sensitive making navigation difficult, particularly for users with large music, video, and photo libraries," he said. "We find it interesting that Microsoft also opted to replicate an iPod-look like most others, but failed in replicating one of the key pieces of the unique iPod experience with its scrolling click-wheel and powerful catalog engine."

Wu continues to believe that replicating the iPod + iTunes digital franchise is an extremely difficult endeavor in which most competitors are unlikely to succeed without infringing on Apple's patents. Of all the companies challenging the iPod, he believes Sony has come the closest to creating a pleasant experience with its Walkman cell phones. Still, he notes that the success of the Walkman phones have had little impact on Apple's ability to maintain and grow its share of the market.

In his note to clients, the analyst also questions Microsoft's decision to target Zune only at the high-end digital media player market, which accounts for only 20 to 25 percent of the players sold.

"Microsoft appears to be targeting the high-end space with its $300 pricing, 30GB microdrive storage, Wi-Fi capability, and FM tuner," Wu said. "While this makes sense to aim after Apple's dominant video iPod, we believe Microsoft is leaving out 75 to 80 percent of the market opportunity in the midrange and low-end that is currently dominated by iPod nano, iPod shuffle, SanDisk, and Sony Walkman phones."

In the analyst's opinion, Microsoft's entry into the digital media player market is akin to waging a civil war with its partners. He says it pits the company in direct competition with its friendlies that have supported its Windows Media format.

"While the focus is on Apple, we believe this move will likely have a much larger competitive impact on Creative, SanDisk, Sony, Toshiba, Samsung, iRiver, Archos, and others," he said. "We believe Microsoft's action could also make partners think twice before deciding to work with Microsoft on future projects."

Wu sees the digital media player market as divided into two camps: iPod + iTunes and Windows Media.  While he believes Zune will likely see some success due to Microsoft's strong brand name and strong marketing effort, he believes that success will be limited by its lack of differentiation versus other Windows players.

"We believe iPod + iTunes is positioned to be the Walkman of the portable media space," Wu wrote in conclusion. "Walkman maintained its dominance over a 15 - 20 year period despite countless competitors trying to create a 'Walkman killer.' We believe iPod = Walkman for the 2000s."

Wu maintains a "Buy" rating on shares of Apple Computer with a price target of $75. The analyst does not provide coverage of Microsoft.