Mindy Mount, corporate vice president and chief financial officer of Microsoft's entertainment and device division, gave the Zune a grade of a "B-" and dropped a series of notable nuggets about potential plans for Windows Mobile.
Speaking at the Citigroup technology conference in New York, Mount covered the products within her sprawling division, which accounts for about 12 percent of the company's revenue.
Here are the highlights:
Regarding the Zune, Mount said:
"We all feel that last year was a good, solid effort for first year. I'd give it a B-. Some things were really great."
In the "great" department, Mount said that "some elements of hardware were nice" and the Zune's video screen was good. The negatives were that the Zune was a "little heavier" that folks expected and Zune's video service isn't running to actually use the video screen.
Mount noted that Zune has done well for "a product out in less than a year and a half." She added that the brand is being built and Microsoft is looking to broaden its identity. Apple is a good competitor that is forcing the Zune product team to raise its game. "In the few years you'll see the continual evolution of that product," said Mount. "We don't have anything to announce right now for the holiday season."
On Research in Motion acquisition rumors, Mount obviously wasn't going to comment. She did differentiate the two strategies of the companies though.
Mount said that RIM's strategy is to focus on a small group of niche--enterprise technology users addicted to the BlackBerry--while Microsoft is looking to build a mass of Windows Mobile users.
"If you look at RIM the number of subscribers is not a huge number. We're a mass play and say 'let's get scale on global basis.'"
Overall, Mount said the smartphone market is growing rapidly and will provide plenty of growth for everybody.
On the Windows Mobile business, Mount said that as she breaks down the entertainment and devices division it's clear that Windows Mobile holds the most promise.
Mount added that mobile is the business with the most opportunity because it plays to Microsoft's strengths: Scale, software and services. It also connects well with Microsoft's back-end applications such as Exchange.
"We really want mass and scale. If you have connections to people that will drive the opportunity to future revenue," said Mount.
Will there be a handset in Microsoft's future? When asked that question Mount said it's possible in the future. Think Zune phone.
Mount acknowledged that Windows Mobile "has come from an enterprise place," but may need more of a graphical treatment like the iPhone has. "Clearly we do identify Mobile being more integrated with photos and music. It's a natural thing to have in our product roadmap," said Mount.
As for handsets, there are no immediate plans for Microsoft to get in the game, but there may be a need in the future. And the precedent is set since Zune's software, hardware and services are integrated and ditto for the Xbox.
For now though Windows Mobile gets the focus.
On the Xbox, Mount reiterated that the business will be profitable this year amid smarter marketing spending and manufacturing improvements. The release of Halo 3 certainly won't hurt. Xbox Live will also be a differentiator with 10 million subscribers.
Mount also noted that there are "new design opportunities with the Xbox." Microsoft has improved manufacturing by developing "accelerated life testing" that can "replicate experience of two to three years of usage."
"We are confident of quality of new boxes we are manufacturing and testing," said Mount.