Microsoft: We Are Expanding, Not Killing, the Zune

After a series of vague statements last week by Microsoft officials at the Consumer Electronics Show (CES), the software giant found itself at the center of yet another controversy: It was allegedly killing its Zune hardware devices, conceding defeat to the iPod, and moving the Zune software to other devices, like smart phones and the Xbox.

It's not true, Microsoft says. Yes, the company has plans to expand the Zune platform from the PC, Web, and Zune devices to other portable devices, including smart phones, and to the Xbox 360. But it is not exiting the Zune hardware business, contrary to rumors.

"We are going to be in the hardware business going forward," Microsoft Zune marketing director Adam Sohn said.

The controversy began during Microsoft CEO Steve Ballmer's CES keynote address. Ballmer didn't mention the Zune once during his own presentation, and when Microsoft vice president Robbie Bach took the stage, he mentioned only its mild successes from last year and offered no glimpse or hint of future innovations.

This prompted questions from the press. In an interview with "The Financial Times," Ballmer "seemed all but ready to throw in the towel on the Zune mobile device," and said that "with the market for dedicated portable media players in decline, the future lay in more 'general purpose' device, such as Apple's iPhone and iPod touch."

Ballmer also nixed rumors of a Zune Phone, though my own sources at Microsoft say Zune Mobile is real and will be announced this year. The company will allegedly ship its own Zune Mobile device and allow Windows Mobile licensees to do so as well.

In any event, it's time to quell rumors that Microsoft is exiting the Zune hardware business. "We've been saying for some time that our strategy for Zune is to provide a great entertainment experience across multiple screens and devices," Microsoft's Paul Davidson noted on the Zune Blog. "Software and services have always been at the core of this strategy: this is nothing new. Today, this means a great Zune experience on the PC and devices, and as we have said before we think it makes sense to extend that experience to other devices in the future."

The key word there, of course, is "extend." Microsoft's plan is to expand the Zune platform to non-Zune devices in the future. But it still plans to continue making and selling Zune-branded media players as well.