RealTime IT News

Microsoft Mulling Possible iPod Alternative

By Ed Sutherland

Tired of being an also-ran in the digital music arena, software giant Microsoft is reportedly considering offering its own device.

The company ignited the discussion with its December shift of its digital media software division and the MSN Music service to the Entertainment & Devices division, which experts agree is the likely umbrella group to make a push against the iPod.

Microsoft was noncommittal about a music player.

"As you may know, the recent reorganizations (both company-wide and within E&D) sought to bring more focus to Microsoft’s efforts in entertainment," a Microsoft spokesperson told internetnews.com via e-mail.

"But Microsoft is committed to innovate and invest in technologies, products and services that enhance the digital lifestyles of our customers."

Analysts believe such a product would likely will center around Microsoft's XBox 360. XBox sales, the brightest point in yesterday's Microsoft's earnings report, ensure future customers.

"If you get the kids young, they are less likely to defect to Apple," Laura Didio, a Yankee Group analyst, told internetnews.com.

A digital music device could boost Microsoft's lack of success entering the home entertainment market. "So far, the results have been less than stellar," Didio said.

While challenging Apple is always sport with Microsoft, "it's not enough to go off on flights of fancy," warned Didio.

The XBox 360 is a perfect platform to launch a digital music play, according to Mike Goodman, an analyst following the game console market for Yankee Group.

The XBox "is built from the ground up to be home entertainment," Goodman says. For example, with a multimedia port, the XBox can play audio CDs, download content, even connect to the iPod.

"The features are already there. It's easy to adapt the 360," for digital music, Goodman told internetnews.com.

But hardware has never been Microsoft's strong suite. Instead, it has distributed its software with hardware made by other vendors.

"The hands-off approach hasn't been successful" in the home entertainment market, according to Didio.

Microsoft knows it cannot take on Apple's lead in digital music head-to-head. Microsoft can emulate Sony's PSP. While targeting the same markets of portable video, "Sony PSP is not competing head-to-head with the iPod," Goodman says.

However, Microsoft can't wait long before making a move. The longer Redmond waits, the more entrenched will become Apple's dominance. "The market is not going to stand still," according to Goodman.

Although the current rumors surrounding Microsoft's intentions amount to "reading tea leaves," Redmond could tip its hand by filing for patent names or registering Web site domains.

Earlier this month, Apple registered the "Mobile Me" phrase with the U.S. Patent and Trademark Office, fueling speculation the computer maker is planning to embark extending its reach into the mobile phone market.

How will Apple respond to news the software giant is considering moving into the digital music turf?

"If you're Apple, your response is 'bring it on,'" said Goodman.