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November 28, 2006

Wall Street piles on the Zune

Posted by David Hunter at 9:35 PM ET.

Douglas McIntyre at BloggingStocks notes the recent rapid run up in the short interest on Microsoft’s stock and wonders if, among other things, it might be due to Wall Street disenchantment with the Zune. I’d be more worried about the PC sales numbers for October, but a report from Gene Munster at Piper Jaffray makes it clear that analysts have their eye on the Zune and its prospects and don’t like what they see:

According to a research note published Tuesday by PiperJaffray senior research analyst Gene Munster, only 8 percent of 40 retailers surveyed by the firm recommend the Zune to customers, while 75 percent recommend Apple’s iPod.

Moreover, some MP3 salespeople hadn’t even heard of Zune, even though the players are being sold at their stores, he wrote in his report.

Quotes from retail clerks cited in Munster’s report range from them claiming they don’t know what the Zune is, to comments that Zune is a good option if a customer does not use Apple’s iTunes software.

“To be honest, I don’t really know much about the Zune,” one clerk is quoted as saying in Munster’s report. Another said, “I don’t suggest the Zune because it is really heavy,” according to the report.

“The buzz that Microsoft was able to generate for the Zune’s launch clearly helped the player in its first week, but much of the publicity took the form of Zune/iPod comparisons,” Munster wrote. He added that these comparisons show that Zune “failed to match up in the eyes of most reviewers” to the iPod, a fact that negatively affected sales of the device.

There’s more in the article from Deutsche Bank analyst Chris Whitmore and UBS IT hardware analyst Ben Reitzes to the effect that Apple isn’t even breaking a sweat fending off the Zune. As for the word from Microsoft:

Initial sales “indicate we are on track to meet our internal business projections,” Zune Director Jason Reindorp said in an e-mailed statement. Microsoft has refused to disclose sales or projections.

What else could they say? More from Ed Oswald at BetaNews:

Whereas the iPod is expected to sell as many as 15 million players this holiday season, analysts only project Zune sales of about 300,000 to 500,000 units at most.

Part of the problem may be the beating the Zune has taken in the hands of the media. Reviews of the product have been nearly all negative, with one going as far as calling the experience “about as pleasant as having an airbag deploy in your face.”

We mentioned that review yesterday.

Filed under Apple, Argo, Coopetition, Financial, General Business, Microsoft, Zune

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One Response to “Wall Street piles on the Zune”

  1. Zune edges SanDisk in 1st week sales -- Microsoft News Tracker Says:

    [...] Microsoft’s much maligned Zune personal media player got some good news today when market research firm NPD reported that in their sample of brick and mortar store sales it had edged the SanDisk Sansa products to claim the number 2 spot after Apple’s iPod. Todd Bishop at the Seattle PI: After a bunch of negative reviews and one particularly awkward moment on national television, there’s a sliver of good news for Microsoft’s Zune initiative today. But it might be fleeting. [...]

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