And they said : Zune will fail ....

The music device can't go up sale-for-sale against industry leader iPod, but it's holding its own



With its Zune digital music player, Microsoft is showing just how powerful its marketing clout is. On Dec. 6, the company disclosed that it's on track to sell more than 1 million Zunes by June 30, the end of its fiscal year. Zune is establishing critical mass. "It's totally in line with our expectations," says Bryan Lee, vice-president of entertainment business at Microsoft.

The projection comes in the wake of sales data from market research firm NPD that shows Zune sliding from second to fifth place among digital music players in the week ended Nov. 25, its second week in stores. But Microsoft says that data includes cheaper players with less storage capacity, not the market it's targeting with Zune.

"The De Facto Challenger"

Lee says Zune isn't positioned to go for the high-volume segment of the digital player market that the flash memory-based players are shooting for. Instead, Microsoft is focusing on the higher end of the business for hard disk-based players.

Zune is the latest effort by Microsoft to find new growth. The company is gambling that it will build an iPod-like business over several years and hopes to eventually cut into the market leader's hegemony with such features as the ability for Zunesters to share music wirelessly with each other.

Making the Numbers

"We wanted to get out and be relevant in the space," Microsoft's Lee says. That grounding will give the company the foundation on which to build its Zune business. "We're pretty fast learners," Lee says.

If Microsoft hits its sales forecast, it would translate into $250 million in sales. That would put Zune sales in its first seven months alone on par with what Goldman Sachs analyst Rick Sherlund estimates will come from annual sales of Microsoft's mobile phone software. And that would be sweet music indeed for Microsoft.

( Read the full article from Businessweek )