Microsoft’s Best Decision of 2011
With all the buzz surrounding Apple’s (Nasdaq: AAPL) iPhone 4S event this week, you might have missed the news that Microsoft (Nasdaq: MSFT) finally put the kibosh on its Zune music player.
I say “finally” because the company has been stubbornly trying to keep the product alive for the past five years to no avail.
As Ed Oswald points out in BetaNews, even at Zune’s peak, it was “outsold by the iPod at a rate of nearly 20-to-1.”
But we shouldn’t look at Microsoft’s latest move as a simple act of surrender to Apple. It’s actually a sign of brilliance.
Here’s why…
Reason #1: Windows 8 is a Potential Game-Changer
By ditching its floundering music player business, Microsoft can focus on its software roots. More specifically, it can ensure that the launch of Windows 8 operating system goes off without a hitch.
You see, Windows 8 represents the biggest leap forward from Microsoft’s original and safe (i.e. – boring) architecture. If you haven’t seen the new operating system in action yet, it’s worth a look.
The OS is optimized for touch features, so it’s designed with tablets in mind. Plus, it promises to deliver a cleaner, more elegant experience for PC users.
Sure, it could be a gamble. But it has the potential to warp us to the next era of computing. As Boy Genius Report’s, Zach Epstein, says, “With a solution like Windows 8… if the iPad ushered in the post-PC era, then welcome to the post-post-PC era.”
Reason #2: Say Sayonara to the Portable Music Player Business
There’s a reason companies like Google (Nasdaq: GOOG) didn’t bother with standalone music devices in the first place: They’re a dying breed.
Consider that 40% of Americans now own a smartphone. That’s up from 27% just six months ago. With several music player applications available – many of them for free – the rise of smartphones is making portable music players obsolete.
In other words, Microsoft isn’t necessarily giving up. It’s waking up.
Apple should be taking its cue from Miscrosoft, too. Its once-revolutionary iPod is next on the chopping block…
Apple Should Brace for the Death of the iPod
Sales for Apple’s iconic music player have been gasping for air lately.
PC Magazine points out that “iPod sales hit their peak during the 2008 holiday season – from around 22.7 million iPods sold at the end of that year, to an expected 8.39 million iPods sold in the third quarter of 2011.”
The downward momentum is accelerating, too. iPod sales in April 2010 were down just 1% from April 2009. But sales in April 2011 plunged 17% from April 2010.
And don’t expect the price cuts and updates Apple announced Tuesday to slow the subscriber fallout, either.
Bottom line: Even if Microsoft’s Zune device was able to outpace Apple’s iPod lineup from day one, it still doesn’t change the fact that the market for such devices is rapidly shrinking.
There’s no question that giving the Zune hardware line the axe was a smart move by Microsoft. Especially if it means we’ll see a more polished Windows 8 interface once it debuts, instead of another Vista nightmare.
Here’s hoping.
Good investing,
Justin Fritz
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