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Despite the negative speculation and the positive iPod sales 
, Microsoft (Nasdaq: MSFT) on Wednesday remained bullish on its digital media device. The software giant said it still expects to sell more than 1 million
Zune players by the end of June 2007.
"It's pretty much spot-on with where we thought we would be at this point," Microsoft Corporate Vice President Bryan Lee said of the company's first public sales forecast for the player.
You Be the Judge
However, judging from the slow consumer uptake since Zune's Nov. 14 launch, some analysts are skeptical that Microsoft will hit the million Zune mark that soon. While Zune has edged out some of Apple's (Nasdaq: AAPL) competitors, it hasn't touched the market leading iPod.
Zune gained 9 percent of the market in its first week on the store shelves, but lost 2.1 percent the following week when SanDisk and others starting competing more aggressively with holiday price cuts. Currently, Zune is tied for fifth with Disney's (NYSE: DIS) Mix Stick players designed for kids.
"Microsoft would have to sell about 500,000 Zunes by the end of the year in order to hit the 1 million mark by next June," Enderle Group Principal Rob Enderle told MacNewsWorld. "I don't think they are going to make that mark. They'd have to generate a lot of volume in what is usually the slowest time of the year for sales of these types of devices."
Comparing Zunes to Apples
Lee was quick to point out that Microsoft only has one product compared to Apple's many iPod models. Apple also has price on its side, among other advantages. Teens can purchase an entry-level iPod for US$79. The 30GB Zune sells for $250.
When Apple launched the iPod five years ago, it didn't take off like gangbusters, either. Apple only only sold about 182,000 iPod units in its first five months. It also suffered an extremely high return rate when consumers realized it wasn't compatible with Windows. The company recovered in 2002 with Windows compatibility and new models. Today, the company has cornered 75 percent of the market.
The odds seem to be stacked against Microsoft hitting its target, but Enderle pointed out that nothing is impossible: "With the right incentives and programs and discounts, you can do almost anything. But unless they change the program dramatically, right now they are not on track for it."
No Storm Warning
Microsoft isn't looking to take the market by storm in its first month of sales, though. The company has said -- and is still saying -- that it is taking a long-term approach to Zune success .
"It's really a 10-year goal, if you will, and our goal in the first phase is to become relevant in the space, to get out and make sure that the music industry, press, retail , analysts all look at it and say, 'Yep, Apple is still the market leader, but Microsoft is out there. They are making an inroad, much like they did in gaming five, six years ago,'" Lee said.
Microsoft's biggest problem, Enderle said, is not necessarily Apple. It's the Zune itself. The hardware isn't stunning enough to turn heads away from the iPod in his view.
"For a product to move aggressively against Apple in terms of volume, the hardware has to be spectacular," he noted. "It has to be something that people lust after and want to be seen with. The hardware is not horrible -- but it's not where it needs to be in order to be a breakout product."
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