Microsoft comments support reports of new Zunes

Next version of Zune devices could be delayed due to production difficulties.

Microsoft Corp. hasn't divulged detailed plans for the next release of its Zune music player, but a company executive last week offered hints that seem to support reports that a flash memory-based Zune and 80-gigabyte device could be in the works.

It hasn't been a matter of if Microsoft plans to expand its Zune product line beyond the several 30-gigabyte players it has on the market, it's been a matter of when. At its annual financial analyst meeting last week, Robbie Bach, president of Microsoft's Entertainment and Devices Division, said Microsoft plans to "broaden" the Zune brand with new styles, capacity sizes and price points as well as new features, though he did not reveal the timing of releases or exact product specifications.

Matt Rosoff, an analyst with Directions on Microsoft, said Microsoft is definitely working on a flash memory-based Zune and models with higher capacity than the current 30-gigabyte version, but the company has not yet discussed specific details of the forthcoming Zune models.

He also confirmed that Microsoft hopes to get the new Zunes to the market in time for the busy Christmas shopping season, which typically begins in late November. "They're cranking to get them out in time for the holidays," Rosoff said.

In the meantime, several device-centric blogs, including Zune Scene, Whiz Byte, Gadgetell and others reported that an 80-gigabyte Zune code-named "Scorpio" and a flash memory-based Zune code-named Draco are currently in the works.

Zune Scene also has reported a production snag that could delay the release of the Scorpio device. According to a post on the blog late last week, the production schedule of Scorpio has been delayed due to problems with wiring. The blog also said that production on Scorpio was expected to be completed on Aug. 31 but has now been pushed back to September.

Through its public relations firm, Microsoft said Monday it has not confirmed the existence or current development of new Zune devices or features, but intends to develop the Zune business by expanding device offerings, adding new features and expanding into international markets.

While Microsoft publicly remains optimistic about Zune's ability to compete against the iPod and other MP3 players, sources close to the company report that some inside Microsoft feel that Zune should be scrapped because it is not worth the company's investment. Microsoft said it has shipped more than 1.2 million Zune units since the product was released in November 2006, but consumers still overwhelmingly prefer Apple Inc.'s iPod devices as their choice of multimedia player. Apple sold 9.8 million iPods in its quarter ended June 30th.

In Microsoft's defense, Rosoff reiterated the company's previous acknowledgment that Zune is a long-term investment, not something executives expected to take the market by storm with its first release.

"They're looking at it as a three- or four-year business," he said. "They wanted to have something in the market for 2006. This year they will have a full product line out and when they get to version 3, that's when they will start to become competitive."

Rosoff added that though he does not know exactly how much Microsoft has invested in Zune, he is sure it is far less than the billions the company has pumped into its Xbox console. "Compared with the Xbox it hasn't been an expensive product," he said.

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