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Quoting from Mr. Softy's most recent 10-Q quarterly report: "Zune platform revenue decreased $100 million or 54% reflecting a decrease in device sales" [page 31, emphasis added].
Sales were down more than half in the same quarter that unit shipments for Apple's (Nasdaq: AAPL ) iPod line rose 3% to a record 22.7 million. Consumers flocked to the iPod Touch, which is gaining traction as a portable gaming platform.
I understand that the Zune has its fans. They rightly point out that the device boasts excellent features that the iPod lacks -- a pretty generous music subscription service, for example. The Zune also does a better job of syncing wirelessly, according to the user accounts and gadget reviews that I've read.
But none of that matters, really.
Zune's problem is, in many ways, the same as Vista's. I don't care how good it is or isn't -- consumers aren't buying. Like the recalcitrant CIOs who refused to upgrade from XP, they've voted with their wallets.
The good news? (There is some, believe it or not.) Microsoft's Xbox gaming console also once suffered a severe sales decline but later reversed its fortunes. Unit shipments fell 61% in Microsoft's fiscal 2007 fourth quarter thanks to hardware problems and increased competition from Nintendo's (OTC BB: NTDOY.PK) Wii and Sony's (NYSE: SNE ) PlayStation 3.
But then came Halo 3 and a very savvy tie-up with Netflix (Nasdaq: NFLX ) for broadcasting movies via the Xbox 360 console. Sales recovered. So much so that, according to researcher NPD Group, Microsoft moved roughly 4.7 million Xbox units in calendar 2008 -- easily besting Sony, which shipped 3.5 million PS3 consoles last year.
The Zune needs similar catalysts. Either that, or with 5,000 layoffs and other cost-cutting measures already in the works, it needs to die.
Your move, Microsoft.
More Foolishness about the rise and fall of Mr. Softy: