Apple's video iPod pricing catches Microsoft by surprise
Microsoft on Thursday official unveiled its Zune digital media player but refused to provide pricing details, likely because it was caught off-guard by Apple Computer's aggressive new pricing on its video iPod line, one Wall Street analyst says.
"Microsoft formally announced its Zune portable media player, with specs in-line with Toshiba FCC filings," American Technology Research analyst Shaw Wu told clients on Friday. "However, pricing and timing were not revealed likely because our sources indicate that Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."
It has long been rumored that Zune, which also features a 30GB hard disk, would retail for $299. But Apple's unparalleled component supply pricing is allowing it to price new iPod models at levels in which no other corporation could both compete and turn a profit.
"We believe Microsoft is re-thinking its pricing strategy amid potential wider losses to stay competitive in the marketplace," Wu wrote in his note to clients.Â*"We remain underwhelmed with the much-hyped Zune, which is essentially a repackaged Toshiba Gigabeat, with limited differentiation vs. existing Windows Media devices.
Still, the analyst believes Zune will likely see some modest success due to Microsoft's vast resources and strong brand name. However, he expects this to come at the expense of its Windows Media "partners" including Creative, SanDisk, Sony, Toshiba, Samsung, iRiver, Archos, and others.
"Interestingly, Microsoft also hinted that it is working on a Zune cell phone (no timing announced)," Wu added. "We are not surprised by this as we believe that all PC vendors will likely participate in the cell phone space over time due to ongoing convergence in computer and communications technology."
In a research note released earlier in the week, Wu said he was both impressed and surprised by the progress Apple made in the key iPod areas of battery life, higher resolution video, and user interface. He said these enhancements to the new iPod lines will further distance Apple from its competition.
"To us, battery life has been the central issue with the previous video iPod and also in the development of its next-generation widescreen video iPod," Wu wrote.Â*"With the advancements in battery life of over 70 percent (30 GB video iPod moves to 3.5 hours from 2 hours, 80 GB video iPod to 6.5 hours from 4 hours, and nanos to 24 hours from 14 hours), we believe Apple is one step (or perhaps two steps) closer in adding widescreen and/or Bluetooth capabilities."Â* The analyst added that he now has higher conviction that those capabilities will show up in a device some time during the first half of 2007.
Wu reiterated a "Buy" rating on Apple shares with a price target of $91, saying the company's competitive advantages and growth prospects remain amongst the strongest in large-cap technology.
"Microsoft formally announced its Zune portable media player, with specs in-line with Toshiba FCC filings," American Technology Research analyst Shaw Wu told clients on Friday. "However, pricing and timing were not revealed likely because our sources indicate that Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."
It has long been rumored that Zune, which also features a 30GB hard disk, would retail for $299. But Apple's unparalleled component supply pricing is allowing it to price new iPod models at levels in which no other corporation could both compete and turn a profit.
"We believe Microsoft is re-thinking its pricing strategy amid potential wider losses to stay competitive in the marketplace," Wu wrote in his note to clients.Â*"We remain underwhelmed with the much-hyped Zune, which is essentially a repackaged Toshiba Gigabeat, with limited differentiation vs. existing Windows Media devices.
Still, the analyst believes Zune will likely see some modest success due to Microsoft's vast resources and strong brand name. However, he expects this to come at the expense of its Windows Media "partners" including Creative, SanDisk, Sony, Toshiba, Samsung, iRiver, Archos, and others.
"Interestingly, Microsoft also hinted that it is working on a Zune cell phone (no timing announced)," Wu added. "We are not surprised by this as we believe that all PC vendors will likely participate in the cell phone space over time due to ongoing convergence in computer and communications technology."
In a research note released earlier in the week, Wu said he was both impressed and surprised by the progress Apple made in the key iPod areas of battery life, higher resolution video, and user interface. He said these enhancements to the new iPod lines will further distance Apple from its competition.
"To us, battery life has been the central issue with the previous video iPod and also in the development of its next-generation widescreen video iPod," Wu wrote.Â*"With the advancements in battery life of over 70 percent (30 GB video iPod moves to 3.5 hours from 2 hours, 80 GB video iPod to 6.5 hours from 4 hours, and nanos to 24 hours from 14 hours), we believe Apple is one step (or perhaps two steps) closer in adding widescreen and/or Bluetooth capabilities."Â* The analyst added that he now has higher conviction that those capabilities will show up in a device some time during the first half of 2007.
Wu reiterated a "Buy" rating on Apple shares with a price target of $91, saying the company's competitive advantages and growth prospects remain amongst the strongest in large-cap technology.
Comments
ms gets caught with its pants down and drops a brown zune
oh god, a zune phone, what the hell is that going to look/be like.
It'll be mauve or possibly taupe.
They have done it several time before loosing money with a product using their size and wealth to push the product until the competition simply gives up.
This strategy so fat has had some success in gaming consoles, but Sony is still the leader.
It'll be interesting to see what happens with mp3 players.
"However, pricing and timing were not revealed likely because our sources indicate that Apple's aggressive pricing at $249 for its new 30 GB video iPod took Microsoft by surprise."
ms gets caught with its pants down and drops a brown zune
LOL!!
they were taken "by surprise"...
booo-effin'-hoo...
that's a W for Apple
a big L for M$.
This strategy so fat has had some success in gaming consoles, but Sony is still the leader.
It'll be interesting to see what happens with mp3 players.
We probably won't know until next summer. I see Zune being around for quite some time, likely cannibalizing the existing Windows Media market before making any impact in the overall digital player market. Microsoft can afford to push this at a huge loss. They want to dominate any market they enter quickly. While Sony may still be the leader in consoles, the recent missteps in the previews of the Playstation 3 could indicate some erosion. The Xbox could well dominate consoles in another year.
Wireless file sharing is an interesting feature, and I wouldn't mind seeing that in the iPodiverse. But, like 90% of the features in Word, it may be tedious.
poor Microsoft...
they were taken "by surprise"...
booo-effin'-hoo...
that's a W for Apple
a big L for M$.
As much as some want to root for Apple; Microsoft is huge. Like a previous poster stated this is just the beginning. Zune will be around for a while. This is good as it **will** keep Apple on the cutting edge of the digital portable market; otherwise they risk losing their profitable of the marketplace.
If that had happened, they would have had a dilemma.
If their pricing was substantially higher, they would have either had to keep it, or would later have to drop it.
The problem there is that the higher prices will be a definite damper on sales, but dropping the price would be a public confession that they could not compete at the original price. Neither way would be a good way to start a campaign.
(review tidbits of recent MS PDA phones ...)
Word & Excel open and work better on the Palm ...
It takes 3 menu choices to select SPEAKERPHONE ...
It'll be mauve or possibly taupe.
Avocado & Harvest Gold are coming back in style.
It has long been rumored that Zune, which also features a 30GB hard disk, would retail for $299. But Apple's unparalleled component supply pricing is allowing it to price new iPod models at levels in which no other corporation could both compete and turn a profit.
I find it hard to believe that Apple can price the iPod below what it costs MS/Toshiba to bulid it AND make 49% gross margins like reported here: http://www.appleinsider.com/article.php?id=2052
Doesn't Toshiba manufactuer some key components of the iPod? I think they may have caught MS off guard, but not underpriced them to the point MS loses much money per unit.
edit 46% gross margins not 49% like I said.
While Apple pays license fees for AAC and mpeg4, MS does not pay any fees for WMA and WMV, and the more the WMA and WMV formats are used (by other companies) the more money they earn.
So this is MS trying to push WMA and WMV into a market that is dominated by open standards. If they succeed in catching lets say 30% of this market they have a guaranteed revenue stream. Just like they have on OEM licenses of Windows and site licenses (like the campus-license for collleges) of Office.
People like to talk about the "Apple-tax", meaning that you pay extra for using Apple equipment, but the real tax in todays computing landscape is collected by MS.
At my workplace we pay 100$ each year pr. worker to MS. This gives us the right to use MS software. But we have to pay pr. capita, not pr. user (of the software). And so, even if I do not use MS software we still have to pay 100$ for a license for me. This is the real computer-tax.
With Zune, MS tries to apply the same tax to music and video files.
So it doesn't really matter if the Zune is a good player or not. Zune is a bad idea for all users.
Microsoft is no stranger to loosing money.
They have done it several time before loosing money with a product using their size and wealth to push the product until the competition simply gives up.
This strategy so fat has had some success in gaming consoles, but Sony is still the leader.
It'll be interesting to see what happens with mp3 players.
Yeah, but so far it hasn't really worked. Xbox shows no signs of recuping the losses anytime soon.
Don't be a looser - use correct spelling.
Thank you.
Just a reminder, kids:
Don't be a looser - use correct spelling.
Thank you.
Siks munce ago i kont evan spal grafik dezinor, an now i are one.
I uze Apol to dezine lots of stuf. it iz a nise mashine to wurk on.
Me think zune a stoopid devise. Mikrosoft a bunch uv idiots.
tank you