According to "a person familiar with the decision," Microsoft will no longer produce the Zune media player. The reasoning boils down to supply and demand. Not enough people demand to own the device.
The Zune was probably the one device that had a chance to challenge the iPod. Obviously, it still wasn't enough. It's not that it wasn't a good device, but the iPod was too far ahead with no signs of slowing down. iPod led the market in media players last year while Zune wasn't even in the top five. Microsoft neither confirmed nor denied the rumor, but offered the following statement.
“We have nothing to announce about another Zune device -- but most recently have introduced Zune HD to Canada via the Zune Originals store and remain committed to supporting our devices in North America,” the company said in an e-mailed statement. “We are thrilled by the consumer excitement for Zune across many new platforms, including Windows Phone 7 and Xbox 360. Our long-term strategy focuses on the strength of the entire Zune ecosystem across Microsoft platforms.”
Instead of trying to compete with the iPod, Zune software will be incorporated into Windows Phone 7. The Zune software, which lets customers buy songs and movies and stream unlimited music for a monthly fee, should help them compete against Google's Android and Apple's iPhone in the smartphone market. Microsoft and others have lost significant mobile market share to both competitors and, having teamed up with Nokia, are looking to make a comeback.
As the Zune goes the way of the Kin, IE 9 appears on the horizon, and Microsoft tries desperately to kill it's own IE6, it will be interesting to see what other changes will come from Redmond.