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Don't bury the Zune. It's not dead yet.
A CNET report confirms that a new version of Microsoft's (Nasdaq: MSFT ) nascent portable media player is coming.
In an interview with Chris Stephenson, Zune's general manager of global marketing, news broke that the new device will feature an HD Radio receiver, the ability to play high-def video on televisions, Wi-Fi cybersurfing via a customized version of Internet Explorer, and an organic light-emitting diode (OLED) touchscreen. Microsoft will also be rebranding its Xbox Live digital video service under the Zune label, making it more than likely that the new Zune player will come with a a premium video store.
"This device is created to go head to head with the iPod touch," Stephenson told CNET.
That's big talk, considering the Zune's market share has thus far hovered somewhere around the iPod's ankles.
The new flash-memory-based Zune HD has a similar size and design to Apple's iPod touch. It obviously has a long way to go to match Apple's success, but the Zune HD seems poised to challenge many existing devices.
A satellite radio slayer?
HD Radio can't compete with the wide range of free Internet radio broadcasts, or the premium content offered by Sirius XM Radio (Nasdaq: SIRI ) on portable receivers. However, terrestrial radio stations that offer HD Radio can triple the number of broadcasts on a single frequency. They typically use the additional channels to offer narrow music genres with minimal advertising, making the techonology a poor man's free alternative to satellite radio. And since the Zune HD is an actual HD Radio receiver, your access to music won't vanish once you leave Wi-Fi range, like Web-based radio does.
An iPod annihilator?
Apple's (Nasdaq: AAPL ) iPod touch -- and maybe even Apple TV -- shouldn't ignore the new Zune's spec sheet. Tying its maligned Zune brand with the successful Xbox franchise should help diminish any negative Zune connotations.
A DS destroyer?
Unlike Nintendo (OTC BB: NTDOY.PK) and Sony (NYSE: SNE ) , Microsoft is the only console maker without a handheld gaming device. Is that about to change? Stephenson was mum when asked, but his silence seems odd compared to his relative chattiness regarding rumors of a Zune Phone. If Stephenson's keeping silent about speculative plans to compete with the Nintendo DS or Sony PSP in advance of this year's E3 gaming expo, this thing will play games. At the very least, Microsoft can't take on the iPod touch without a developer-friendly app store, offering far more than the handful of casual games presently playable on a Zune.
Zune has a lot of ground to make up since its uninspiring debut three years ago. When even Microsoft devotees like Xbox hub GameStop (NYSE: GME ) stop stocking the Zune, you know that the brand is on the ropes.
Microsoft has little choice but to swing. It's comforting, at least, to see it swing hard.
Other Zune-rific leads: