Microsoft’s Zune fiasco faces steep sales declines; analyst says pull the plug

“Microsoft Corp.’s quarterly earnings report last week featured a number of grim statistics, including a relatively overlooked, albeit steep decline related to its Zune portable media player — potentially adding more uncertainty to the embattled product’s future,” John Letzing reports for MarketWatch.

MacDailyNews Take: Zune has no future. It never did.

Letzing continues, “Designed to rival Apple Inc.’s iPod, Microsoft’s Zune first appeared in late 2006, but has struggled to chip away at the iPod’s dominance… ‘If Zune were going to make a strong move against the iPod, it already would have,’ said IDC analyst Susan Kevorkian.”

MacDailyNews Take: Which reminds us, in the case of the Zune: “Paging Dr. Kevorkian… paging Dr. Kevorkian…”

Letzing continues, “Revenue for the non-gaming side of Microsoft’s Entertainment and Devices unit, which includes the Zune, tumbled 42% to roughly $211 million for the fourth fiscal quarter ended in June… ‘The market reception for Zune is so disappointing that many retailers have even stopped selling it altogether… Microsoft should abandon Zune and follow Apple’s strategy to try to make its presence felt in the high-growth smartphone sector,’ said George Kurian, a vice president at Tradition Capital Management LLC, which owns Microsoft shares.

MacDailyNews Take: General rule of thumb: When your product’s name has become the latest slang for fecal matter, it’s probably doing your company more harm than good.

Letzing continues, “”The easiest way for Microsoft to do that, Kurian said, would be to simply purchase Palm Inc. Palm’s Pre smartphone, released in June, has been touted as a viable rival to the iPhone. Tradition Capital Management does not own any Apple or Palm shares.”

“The last mention made in company filings of the Zune’s performance had come in a fiscal second-quarter report, where Microsoft said revenue at its Entertainment and Devices division was undercut by a 54%, or $100 million decline in Zune platform sales,” Letzing reports. “NPD Group analyst Ross Rubin said in the first half of this year, Zune’s share was 2%, compared to about 70% for the iPod.”

Full article here.

MacDailyNews Take: The lack of a monopoly built on ideas appropriated from Apple equals yet another abject failure for derivative Microsoft.

It’s doing well. We knew what we wanted… We wanted to have a reputation of doing something innovative… We feel great about Zune. – Bill Gates, January 23, 2007

In a word, no. – Steve Jobs, October 15, 2006, when asked by Newsweek’s Steven Levy if Microsoft’s Zune had him worried.

Any product that is essentially a copy of something else… there’s something inherently less interesting about them. Because the companies that make them don’t lead, they follow. – Paul Thurrott, March 19, 2009