There is chatter on Wall Street that Microsoft may be readying a new hardware initiative by producing its own digital media player to garner a piece of the market that Apple’s iPod has defined.
Drew Brosseau, an analyst at SG Cowen, says he believes that Microsoft will — and should — build its own digital media device. There are at least some intriguing hints that the brass in Redmond, Wash., are moving toward giving the go-ahead to such an effort.
Brosseau thinks Microsoft strongly wants to enter the online music business and to explore the software/hardware/service nexus. The analyst also points out that, with the recent release of the Xbox 360, Microsoft has a hardware-design group with time and energy to spare until the next videogame hardware cycle.
This isn’t necessarily a profound threat to the iPod juggernaut, which has enormous momentum. But the $8 billion digital music and media business — growing 15% a year — includes $2.5 billion of non-iPod revenue, much of which Microsoft could sop up with a strong entry in the segment, says Brosseau.
That’s not a major slug of cash, in the context of the software giant’s expected $45 billion in revenue this year. But it fits with the company’s desire to layer on products in fast-growing businesses not tied to the PC cycle.
More by following both the links. Aside from the question of the return to Microsoft from trying to crash the portable media player market, such a move would be exceedingly inconvenient for Microsoft partners already producing players based on Microsoft’s Windows-centric Portable Media Center specification. The folks at Creative, Samsung, and iriver are going to be more than a little grumpy if Microsoft tries to elbow them out of the way. On the other hand, their players haven’t been a rousing success and perhaps with a little “coaxing” they would be willing to leave the field to Microsoft. And of course, if the Xbox crew runs the effort, the Microsoft player wouldn’t necessarily be Windows-centric.
Update: Rick Aristotle Munarriz considers the pros and cons at The Motley Fool.