Analysis of IT news

Friday, July 07, 2006

News Item: Microsoft announces an iPod competitor for Christmas

News Item: Microsoft announces an iPod competitor for Christmas.

Analysis: this announcement is almost a 180ยบ change from Redmond's typical strategy which is to work with a wide array of partners, like they've done for the PC, the PDA and the cell phones.

This strategy is however not entirely new for Microsoft. It has indeed embraced a vertical strategy with the X-box where it has designed and marketed itself the video game console, as well as a lot of hit games that came with it (Halo being the most famous one). A vertical strategy makes sense when assembling different components from different vendors isn't performant enough. For this case, the issue is not performance but simplicity.

Such a change however carries a risk: alienating its current partners. Several MP3 players manufacturers and online music stores are indeed using Microsoft music format. Those companies now will see one of their key supplier become a competitor. This is a golden opportunity for Real Networks (which has its own music format) to snatch some of those partners from Redmond.

The other risk is that it might be tough to beat Apple on one of its strengths: hardware. Sure, Microsoft can deliver a player with more features and cheaper than the iPod (it is indeed ready to sell the devices at a loss if it means dethroning Apple). But will it be able to come up with something as small as the iPod nano?

To its credit, Microsoft was able to beat Sony and release the next generation console before the Nippon giant - and Sony is no amateur when it comes to consumer electronics. But designing a console by pouring billions of dollars is one thing. Coming up with a device which is as small as an iPod and as reliable when tossed around (as MP3 players are) is a different story. Remember how the X-box 360 has been known to have some heating problems?

My gut feeling is that, like any first version from Redmond, the MP3 player will be bulky and will be a commercial flop. It might not even be able to release it before Christmas for that matter. I'm not even sure if Microsoft expects to ship something this year. After all, most of its products have been significantly delayed.

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