Analysts comment on Microsoft ‘iPod killer’ plans

Following Microsoft’s confirmation of its Zune player and media store, several analysts have chimed in with what the company’s plans will mean for Apple and Microsoft’s partners. Analysts stressed that Microsoft will likely be hurting its own partners more than Apple. “While the focus is on Apple, we believe this move will likely have a much larger competitive impact on Creative, SanDisk, Sony, Samsung, iRiver, Archos, and others,” said American Technology Research analyst Shaw Wu. “Microsoft’s action could also make partners think twice before deciding to work with the company on future projects. We view Microsoft’s entrance into portable media hardware akin to a civil war.”
Michael Gartenberg of Jupiter Research also said Microsoft’s allies will take the brunt of the move. “Early market share isn’t likely to come from disgruntled iPod users looking to switch,” said Gartenberg. “The real losers in the short term are likely to be the likes of Creative, iRiver and other former partners that have failed to deliver to market share from Apple and will now find themselves not only competing with Apple but with their former partners from Redmond.”

Analyst Mike McGuire of Gartner Group said that Microsoft may not have any more luck than Sony has had in challenging the iPod’s dominance. “Having those assets is no guarantee of success,” McGuire said. “It is going to be very difficult and require people power and effort as well as a lot of money.” McGuire added that Microsoft could be spreading itself thin by taking on the iPod and iTunes at the same time it plans to launch its new Vista operating system.

AmTech’s Wu noted that Microsoft will have a hard time recreating the iPod and iTunes experience. “Replicating the ease-of-use and experience of iPod + iTunes is a difficult endeavor, not to mention likely to infringe on Apple’s patents,” the analyst said. “In our opinion, Sony has come the closest in creating a pleasant experience with its Walkman cell phones, but its success has had little to no impact on Apple (likely because customers use the Walkman phones mostly as cell phones). It remains to be seen if Microsoft can create a pleasant, seamless user experience.” Wu also said that Wi-Fi features will hurt the Zune player. “The biggest issue with this is that Wi-Fi power requirements are still quite steep and so we are skeptical that battery life will be strong on these Microsoft portable media players,” he said.

Despite Microsoft’s uphill battle, Bear Stearns Equity Research analyst Andrew Neff expects Apple to respond with new innovations to widen the innovation gap between the iPod and Zune player. Specifically, Neff sees Apple focusing on four areas: wireless, content, storage and platforms. While Zune presents a “clear challenge” to the iPod, “the competition is not new—there are plenty of music players and music downloading services but the challenge for any tech company is to obsolete your products or someone else will,” the analyst said.

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