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Microsoft Zune revenue drops by $100 million

updated 01:15 pm EST, Fri January 23, 2009

MS loses $100M on Zune

Microsoft lost approximately $100 million in Zune revenue in its most recent quarter, filings with the Securities and Exchange Commission indicate. The number represents a 54 percent drop versus the same quarter in 2007, and is being attributed to low sales, in spite of the introduction of improved second-generation models. The division responsible for the player, Entertainment and Devices, brought in $151 million, but mainly on the back of PC and Xbox 360 sales.

It is thought that Microsoft may be trying to slowly phase out the Zune, which has always struggled to gain ground versus its main rival, the Apple iPod. CEO Steve Ballmer has de-emphasized the player in interviews, suggesting that its technology may be fused with Windows Mobile. As a part of its recent job cuts, the company is also believed to have taken harsh action in Entertainment and Devices, which may point to diminished support and/or development. [via Engadget]

by MacNN Staff



  1. njfuzzy

    Joined: Dec 1969


    Is it time?

    Is it time for Microsoft to drop the Zune product? They should probably stick to platforms other people execute, as that sort of ecosystem seems to be their strong suit.

    Also, axing the Zune should mean a brighter future for the XBox, one of their rare major hardware successes.

  1. dynsight

    Joined: Dec 1969



    Is anyone surprised?

    It seems as if Micrsoft cannot stand someone else having success in a technolgy related field. Browsers, network hardware, phones, music players...

    Microsoft does a disservice to their shareholders when they take their focus off their core business.

    Hopefully, they can focus on adding features to Office that people actually wish to use!

  1. Feathers

    Joined: Dec 1969


    XBox Success?

    How exactly can the xBox franchise (xBox and xBox360) be regarded as a "success" when Microsoft have thrown over five billion (yes, billion) dollars at it since inception and still sell the consoles at a loss in the hope that licensing revenue from the games will someday produce an overall profit?

  1. MatildeMatilde

    Joined: Dec 1969


    Wrong strategy

    I've always said that if Microsoft wanted to kill the iPod, they should use their proven strategy of bundling a Zune with every copy of Windows sold.

    That's the way Microsoft products usually succeed: by being the default.

  1. Constable Odo

    Joined: Dec 1969


    Why wasn't this news

    spread all over the internet before Microsoft announced it's earnings. A month before Apple earnings every crappy analyst was spewing how disappointing iPod sales would be for Apple and the company was heading for the toilet. Hardly anybody knew what they were talking about but that didn't keep their mouths shut. Zune and XBox sales are probably always disappointing, but you rarely hear a word about that. Maybe because nobody really gives a c***. It'll be even nicer to hear that the Zune is being discontinued soon.

  1. vasic

    Joined: Dec 1969


    Precisely, Feathers!

    The only way you could label X-Box a success if you were to judge it by the market share or, subjectively, its quality against competition at the time it was released. However, when you look at the whole picture, it's clear that MS has failed there as well. They are selling a piece of hardware that has noticeably more muscle than their competitors, but are undercutting them with price, purposely taking a big loss (much like they did with Zune) in an effort to make it up elsewhere. The device is still very, very long way from returning its original $4B investment.

    Like Zune, X-Box is a colossal failure for MS share holders.

  1. vasic

    Joined: Dec 1969


    Wrong amount

    ...make that $5B original x-Box investment...

  1. Mr. Strat

    Joined: Dec 1969


    Rare in the wild

    Working on a college campus, I see iPods of various flavors all over the place. I think I've seen two Zunes.

    The thing was doomed from the start. It's a piece of junk.

  1. elroth

    Joined: Dec 1969



    I guess squirting never really caught on.

  1. DeezNutts

    Joined: Dec 1969


    Re: exactly

    "They are selling a piece of hardware that has noticeably more muscle than their competitors, but are undercutting them with price, purposely taking a big loss (much like they did with Zune) in an effort to make it up elsewhere. The device is still very, very long way from returning its original $4B investment."

    Actually everyone in the industry does this with the exception of Nintendo.

    It is common practice in the industry to sell the hardware at a loss with the hopes of making it up via the licensing and game content. Also the last couple years of a console's life and the manufacturer generally sees hardware profit as the component prices have dropped considerably by then.

    As for the xbox being a success, that depends on the future performance of the console. If it is in the black right now - on a quarterly basis, not what they have spent grand total since the beginning - then it has the potential to give a return at some point.

    If it is still in the Red, well that depends on how much MS is willing to gamble and it could end up being a huge loss.

    I don't think MS will be pulling out of the console market anytime soon. Of course if they keep losing money anything could happen!

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