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1 million Zune sales expected by June

December 07, 2006|From Bloomberg News

Microsoft Corp. said Wednesday that it would sell more than 1 million Zune digital media players by June 30, giving its first forecast for the device and showing how it plans to stack up against Apple Computer Inc.'s iPod.

That tally should allow Microsoft to meet its goal of becoming the second-biggest maker of media players with a 30-gigabyte hard drive, said Bryan Lee, a vice president in Microsoft's entertainment business. Lee declined to say how many Zune players Microsoft has sold.

By comparison, Apple will sell about 40 million iPods in the next three quarters, according to an estimate from analyst Benjamin Reitzes of financial services firm UBS. Redmond, Wash.-based Microsoft, the world's largest software maker, expects to trail Apple for some time, Lee said.

"We were not expecting to be close to them," Lee said about Apple. "This is a decade-long effort for us."

Sales so far are about what Microsoft expected, Lee said. He said Cupertino, Calif.-based Apple's sales were aided by the company's iPod nano and flash-memory devices, products Microsoft has yet to match.

"That seems like a very small number" of Zune sales, said Matt Rosoff, an analyst at independent research firm Directions on Microsoft.

"Microsoft is going to have a pretty small chunk, even of the hard-drive-based player market," he said.

Zune, which went on sale in the U.S. on Nov. 14, dropped from No. 2 in retail sales of media players to No. 5 during its second week, market research firm NPD Group Inc. said Tuesday.

Microsoft wants to use Zune to gain "a foothold to expand" into new countries, sell models with different sizes of hard drives and develop flash-based models, Lee said. The company will also consider new types of devices such as a combination phone and player, he said.

Microsoft is investing hundreds of millions of dollars over the next three to five years in Zune, which will lose money through 2008 at least, Robbie Bach, president of the company's entertainment and devices division, said in July.

Shares of Microsoft fell 14 cents to $28.99.

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