Microsoft going ahead with iPod rival, but will impact partners

The Wall Street Journal reports that Microsoft is currently in talks with Hollywood studios about licensing movies and TV shows for use with a forthcoming Microsoft portable device. The company has reportedly told at least one studio that it may launch the iPod rival as early as the fourth quarter of this year. Analysts believe, however, that the device will have a bigger impact on Microsoft’s current partners. “We believe the biggest issue with Microsoft entering the portable hardware business is that it puts it in direct competition with its partners,” American Technology Research analyst Shaw Wu said in a research noted provided to iLounge. “While the focus is on Apple, we believe this move will likely have a much larger competitive impact on Creative Technology, Sony, Samsung, MTV Networks, and others.
Wu also says that it is “yet to be seen if Microsoft can be profitable (and not to mention successful)” in producing portable hardware. “We believe concerns that Apple would be in grave danger should Microsoft pursue a vertically integrated model are overblown,” Wu said, “for a couple reasons: 1) we believe Apple’s vertical model is tough to execute with not many companies (if any) succeeding; 2) Apple has a large installed base of about 50 million iPods and 300 million iTunes users; 3) we believe Apple’s competitive advantages are largely defendable including its familiar and easy-to-use user interface, industrial design, brand name, and world-class supply chain; and 4) we believe AAPL is pursuing a longer term broader strategy beyond iPods.”