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Microsoft trots out a new Zune. But can anything unseat the iPod?

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Photo courtesy of Microsoft

(Read caption) A photo still from the Zune website shows the new Zune HD, which is expected to hit shelves in the fall. It's a beautiful machine, yes, but can it unseat the iPod?

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The rumors have been swirling unabated since the winter: Microsoft is preparing a new iteration of its Zune player, which was first trotted out in 2006 to largely lackluster sales. Today, comes the confirmation. According to PC World, the Zune HD is scheduled to hit stores in the late fall, just in time for the back-to-school rush. Although all the details have yet to be unveiled, we know that this will be the first Zune to be fully compatible with Microsoft's Xbox Live online marketplace.

Features galore

The svelte gizmo will also be equipped with an OLED touchscreen, and boast a 480 by 272 resolution – enough to show widescreen video, if the gadget is held horizontally. Better yet is the inclusion of an HD radio, which the iPod and iPhone lack. On the Zune HD website, Microsoft boasts that the HD will use a "full-featured web browser including tap to zoom technology, built-in accelerometer, and touchscreen QWERTY keyboard." In an interview with DailyTech.com, Enrique Rodriguez, corporate vice president of the Microsoft TV, Video and Music Business Group, hinted that interconnectivity is of paramount importance:

"The Zune music player is an integral part of the overall Zune experience, and we're proud to be growing and extending our offering beyond the device... Delivering on Microsoft's connected entertainment vision, this news marks a turning point for Zune as it brings cross-platform experiences and premium video content to living rooms around the world."

David vs. Goliath

In other words, in order to compete with the iPod, this Zune, unlike the Zunes that came before, will have to play well with other parts of an user's operating system. When the first Zune arrived, in 2006, reviewers complained that it was not compatible with some audio file formats, and because it was chained to the Zune Marketplace, it could not offer the same video functions as the iPod. Subsequent updates brought the Zune within firing range of Apple's best-selling device, but market domination eluded Microsoft.

As Wired noted this January, the Zune platform revenue sank fast at the end of 2008, to the tune of a $100 million revenue decline:

The [decline] "reflects a decrease in device sales," said Microsoft in its quarterly filing with the U.S. Securities and Exchange Commission. But this is one thing that Microsoft will have trouble blaming on the economy. Earlier this week Apple said it sold 22.7 million iPods during the previous quarter, a three percent growth from the year before.

Now Microsoft is fighting back with the Zune HD, which addresses many of the shortcomings of the original device. Will it succeed? Some critics are saying no, months before the device is in hand. Here's Christopher Breen at Macworld, who argues that Microsoft is missing the point:

Recall the last several iPod touch commercials you’ve seen. Do they emphasize playing movies, as you can with every other iPod save the shuffle? Does Safari play a major role in these 30-second dramas? Of course not, Apple routinely lumps in the iPod touch with the iPhone, not other iPods. And it does so because it’s about the apps—games, utilities, social networking, news, media streaming. Yet Microsoft, from all appearances, is jamming its fingers in its ears and sing-songing “iPod! iPod! iPod! We have radio, iPod doesn’t!” as if radio, of all things, is the killer app (which, if you really want it on your iPod touch, can be had via one of a handful of apps).

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