MUSIC FOR YOUR EARS?
Speaking of Apple's vigorous iPod business (see preceding post), Barron's (registration required) has a story on Microsoft potentially introducing an mp3 player to compete with Apple, titled "Will Microsoft take on the iPod?":
"DREW BROSSEAU, AN ANALYST at SG Cowen, says he believes that Microsoft will -- and should -- build its own digital media device. There are at least some intriguing hints that the brass in Redmond, Wash., are moving toward giving the go-ahead to such an effort.
Last week, the company announced that it had joined with Viacom's (VIA) MTV Networks to launch a digital music service that will be built into Windows Media Player, to compete with Apple's iTunes. The network will be called Urge, and its announcement helped knock down the shares of online music service RealNetworks (RNWK) 4% Wednesday, to 8.31.
Then came news, by way of a Microsoft memo described in the Wall Street Journal Thursday, that Microsoft was consolidating its consumer businesses (music, movies, videogames and TV) under Robbie Bach, a leader in developing Microsoft's successful Xbox video console, to date the company's main foray into hardware.
Brosseau thinks Microsoft strongly wants to enter the online music business and to explore the software/hardware/service nexus. The analyst also points out that, with the recent release of the Xbox 360, Microsoft has a hardware-design group with time and energy to spare until the next videogame hardware cycle.
This isn't necessarily a profound threat to the iPod juggernaut, which has enormous momentum. But the $8 billion digital music and media business -- growing 15% a year -- includes $2.5 billion of non-iPod revenue, much of which Microsoft could sop up with a strong entry in the segment, says Brosseau.
THAT'S NOT A MAJOR SLUG of cash, in the context of the software giant's expected $45 billion in revenue this year. But it fits with the company's desire to layer on products in fast-growing businesses not tied to the PC cycle.
Look toward next month's big Consumer Electronics Show for possible news on this front."
Microsoft's hardware division has a number of opportunities in terms of new products besides an mp3 player. As mentioned in a post
a couple of weeks ago, the company also has an opportunity to introduce
internet telephony related hardware to supplement the VOIP features in
it's online services. Last month I discussed how Microsoft didn't address Apple as a potential competitor in the now famous, second "Gates memo". Maybe they're focused on them after all. Of course there are reasons for Microsoft NOT to jump into MP3 players that the article does not mention. Specifically, some of the partners supporting various Microsoft consumer electronics related software platform initiatives like the Smartphone, Media Center PCs and DRM and music store support, may not like the company directly offering competing products. But that's seldom stopped the company before.
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