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Zune sales crash, Microsoft urged to quit

updated 12:30 pm EDT, Thu July 30, 2009

Zune Sales Crashing

Microsoft's struggling Zune media players may have been single-handedly responsible for a plunge in revenue at the Entertainment and Devices group and could be a sign of much deeper trouble for the line as a whole, analysts said Thursday. Although only a small part of Microsoft's poor spring quarter, revenues the group that handles both the Xbox 360 and Zune dropped by 42 percent year-over-year and alludes to Zune sales falling precipitously in the same time span. The Xbox 360 isn't likely to have contributed to the fall as it was one of the few consoles to see more systems shipped this spring than last.

By contrast, market leader Apple also saw its iPod revenue decline 11 percent but still has over 70 percent of the US market, according to NPD data. Apple during its fiscal conference call admitted the drop was likely the sign of a long-term reduction in the dedicated MP3 player business, but its softer decline and steady market share point to some Zune owners simply opting for iPods or exiting the market altogether. Microsoft has never typically had significantly more than 2 percent of the US market.

While the company has never published Zune unit numbers since reaching the 2 million mark in 2007, the numbers are low enough that Traditional Capital Management analyst George Kurian is calling for Microsoft to exit the MP3 player market and focus on Windows Mobile smartphones. He notes that some, unnamed retailers have stopped selling Zunes entirely as their sales have been "so disappointing" that it leaves no other real alternative.

"Microsoft should abandon Zune and follow Apple's strategy," he says.

He suggests that Microsoft should consider buying Palm, which would give it a modern, multi-touch smartphone platform with little investment. Microsoft isn't expected to have multi-touch phones of its own until Windows Mobile 7, which may not arrive until April.

Microsoft is unlikely to take the advice with the impending September release of the Zune HD, as it solves many of the problems associated with the Zune line. It brings multi-touch input with web browsing and should also bring technical superiority through an OLED screen, HD Radio tuning and 720p video playback. The new player will bring attention back to the Zune brand and also close the two-year gap between the iPod touch and Microsoft's entry.



By Electronista Staff
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Comments

  1. dagamer34

    Fresh-Faced Recruit

    Joined: Apr 2007

    +19

    Umm, duh?

    Maybe that's because they announced the Zune HD months before it was going to be available. If Apple had announced it's 5th gen iPod Nano and 3rd gen iPod Touch in April, their sales would fall off a cliff too!

  1. dwoodruff

    Fresh-Faced Recruit

    Joined: Jul 2006

    +9

    or...

    Could it be Zune is just a friggin lame product, produced by a bloated, unimaginative company????

  1. garmonbosia

    Fresh-Faced Recruit

    Joined: Aug 2002

    +9

    good idea genius

    M$ should buy Palm and do what it usually does when it buys innovation. Destroy it with their oppressive corporate structure.

    For Apple it would be a double bonus. Ruin any (slim) chance of Palm ever competing with the iPhone, and distract M$ from doing the things that would actually put them in a position to compete in the smart phone business.

  1. kdogg73

    Dedicated MacNNer

    Joined: Dec 2002

    -1

    Cut and Paste

    " should abandon and follow Apple's strategy," he says.

  1. kdogg73

    Dedicated MacNNer

    Joined: Dec 2002

    +1

    Cut and Paste

    What it was suppose to say:

    "(company) should abandon (product) and follow Apple's strategy," he says.

  1. Johnny Niles

    Fresh-Faced Recruit

    Joined: Jun 2007

    +14

    Yes and no

    "George Kurian is calling for Microsoft to exit the MP3 player market and focus on Windows Mobile smartphones."

    Probably, yes.

    "Microsoft should abandon Zune and follow Apple's strategy,"

    No. Following Apple's lead results in problems like the Zune. And now Microsoft is doing the same thing with retail stores, it's like they are incapable of learning from their mistakes. No, what Microsoft needs to do is INNOVATE. Stop copycatting Apple and do something on your own for once.

  1. jpellino

    Fresh-Faced Recruit

    Joined: Oct 1999

    +3

    But... but... but...

    ... what will they sell in those spanky new stores? Other PPL's Hardware? XBoxes? Win7 for people who could buy it at a better price elsewhere?

  1. hayesk

    Professional Poster

    Joined: Sep 1999

    +14

    Not surprising

    Once you've sold to the anti-Apple crowd, there's nobody left to sell to.

    People buy an iPod for a variety of reasons: style, interface, size, etc.

    People buy a Zune because it's not an iPod - not really much of a reason.

  1. MacDan2004

    Fresh-Faced Recruit

    Joined: Dec 2004

    +5

    Amen to Johnny Niles

    I agree: "No. Following Apple's lead results in problems like the Zune. And now Microsoft is doing the same thing with retail stores, it's like they are incapable of learning from their mistakes. No, what Microsoft needs to do is INNOVATE. Stop copycatting Apple and do something on your own for once."

  1. digiprod

    Fresh-Faced Recruit

    Joined: Sep 2007

    +2

    ZuneHD Yeah?

    I see a bad moon arising...

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