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It's been a bad month for Microsoft (Nasdaq: MSFT  ) Zune dreamers.

Was that a Zune that President-elect Barack Obama was working out with in a gym? Nope -- that story proved to be inaccurate, as Obama's campaign contacted the reporter to clarify that the next leader of the country jams exclusively with an Apple (Nasdaq: AAPL  ) iPod.

Is a Zune phone hitting the market early next year, to combat the popularity of Apple's iPhone and Google's (Nasdaq: GOOG  ) Android offspring? Speculation there was snuffed out by industry blog Gizmodo last night. Zune product manager Brian Seitz is confirming that there won't be a Zune-backed wireless handset at next month's Consumer Electronics Show.

Sure, a smartphone with Zune compatibility would have been a dud. Earlier this year, Zune had just 4% of the digital media player market, badly trailing category-killer Apple and even distant second-place finisher SanDisk (Nasdaq: SNDK  ) .  

Q1 2008

Market Share









Source: NPD Group.

The real key to a Zune handset would be to cash in on Microsoft's Xbox 360 diehard gamers and make it a multipurpose communications, multimedia, and gaming portable device. Sony (NYSE: SNE  ) and Nintendo (OTC BB: NTDOY.PK) have handheld players to match their consoles, so why not Microsoft? Anything short of that doesn't make a whole lot of sense. Microsoft is too big and powerful to support a niche device with limited appeal for too long.

So, sure, maybe we don't get the Zune phone device next month. Maybe we never get a ZuneBox handheld gaming device. Absent either scenario, can anyone see Microsoft's two-year-old player making it to its third birthday?

2009 has to be a big year for the Zune, or it will likely be its last.

Other Zune-a-riffic leads:

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Microsoft is a Motley Fool Inside Value recommendation. Google is a Motley Fool Rule Breakers selection. Nintendo and Apple are Motley Fool Stock Advisor recommendations. Try any of our Foolish newsletters today, free for 30 days.

Longtime Fool contributor Rick Munarriz can't recall the last time he saw a Zune out in the wild. Hdoes not own shares in any of the stocks in this story. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.

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