Microsoft exec: Zune gets a B-; Xbox profitability; Windows Mobile's future

Microsoft exec: Zune gets a B-; Xbox profitability; Windows Mobile's future

Summary: 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.

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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.

Topics: Microsoft, Apple, Mobile OS, Mobility, Windows

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38 comments
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  • [b]Zune gets B-[/b] maybe if the scale goes up to A++++++ ...NT

    NT
    raycote
  • You know it's bad when MS gives it a B-

    I am sure the player is technically "decent", but the brown, what were they thinking. It is also one of the plainest players (looking) I have ever seen. In any case, when MS is not spinning anything in the most positive way, you really have to ask yourself how bad is it?

    In all my trips to CompUSA, Best Buy, I have yet to see a single person stop at the shrinking Zune display space.

    TripleII
    TripleII-21189418044173169409978279405827
    • Well the jury must be in then if ....

      .... "In all my trips to CompUSA, Best Buy, I have yet to see a single person stop at the shrinking Zune display space.

      TripleII"

      I mean faced with that kind of scientific data how can anyone not accept your assessment? Don't quit your day job!
      ShadeTree
      • Zune selling better than AppleTV!!

        Last I checked, Zune was #58 on Amazon's best seller list so [b]someone[/b] is buying them! AppleTV? Isn't even in the top 100. :)
        NonZealot
        • What kind of comparison is that?!

          The AppleTV is more of just a test for the market (as jobs has said himself).
          Stuka
        • It better be..

          Apple TV is not selling well, but it is only a minor release. Jobs himself even called it hobby (or something like that.) It's just a wireless media router similar to airport. The Zune was a much bigger product launch for Microsoft. They have a lot more riding on it's success. and #58 isn't going to bring them that success.

          Their entertainment division has been losing money for so long, that if Halo3 doesn't pull their chestnuts from the fire, one wonders what will.
          Tigertank
        • Microsoft-style logic being used!

          That Zune is #58 in the Amazon best-seller list simply means its #58 on the Amazon best-seller list.
          Whereas the Apple TV is probably ranked-in the top 50 on the Apple site and the Zune with no sales at all!... ;o)

          You can't selectively use figures from a single retail-source and extrapolate to the entire market.

          If people want to buy the Apple TV then they'll buy it from the Apple website or an Apple store, not from Amazon! (As shown by the sales of the iPhone from Apple stores being seven times larger than sales from AT&T stores.)
          sj_z
          • Hehe, Apple Zealot-style logic being used!!

            Funny how the Apple zealots lived and breathed by Zune's Amazon best seller ranking when the Zune came out so it has to count for [b]something[/b], doesn't it? Every time the Zune dropped a spot, dozens of Apple zealots proclaimed with glee that [b]this[/b] was the year Microsoft would die!!!!11!!1one1!! So why is Amazon's best seller list a reliable source when it is being used to prove the Zune isn't selling at all but it isn't a reliable source to discount arguments like [i]no one is buying the Zune[/i]. Obviously people l[b]are[/b] buying the Zune (a first generation MS product) and in [b]far[/b] greater numbers than AppleTV (a first generation Apple product). People tend to think that the iPod was an instant success. It wasn't. The first 3 generations failed [b]miserably[/b].
            NonZealot
          • Um that arguement only works "IF" you can prove that

            the person you are responding to used the so called "Apple Logic" that you are
            illustrating. If not then it's not a valid arguement.

            Pagan jim
            Laff
          • You mean like everyone else in this discussion

            ...including yourself.
            ItsTheBottomLine
          • Think before you talk, son.

            Actually, they didn't fail - pretty much, it sold acceptably within the ecosystem of other DAPs at the time and grew as the idea of portable MP3 players settled into public consciousness. I'd say about six years for a trend to make its way from the digitalensia to the hoi polloi sounds about right - DVD took about three to five years with hard "enforcement" of adoption. A non-industry-driven adoption model would take a bit longer as the public has to find out about this new thing instead of having it driven down their throats.

            The Rio hits in 1998 Q3, and other players follow. They sell DAPs to the Slashdot crowd for several years as they also percolate into the public awareness. The combination of public awareness of DAPs in general and the iTMS to provide digital music heterodyne to sell product. (You'll notice that from 2003 Q3 onwards, the iPod sales start ramping up with very few non-seasonally-explainable downticks.)
            Before 1994 Q4, the player sold well (within the class of MP3 players, that is). AFTER that point, it simply began to dominate the market.

            On the one hand, Microsoft "pleading the fifth" on disclosing sales figures for the Zune should not be viewed as self-incriminating evidence that they're selling poorly. They don't have to tell people if they don't want to. But on the other hand, it is kind of telling that they aren't trumpeting how big "the social" has grown. But what appears to have happened (just from anecdotal evidence/observation/circumstantial evidence) is that they put out a pretty pedestrian player with a bunch of hoopla and the public let out a great big "meh.". (Once again, without sales figures, though, it's all a big guess.)

            (see <http://en.wikipedia.org/wiki/Image:Ipod_sales.svg> for more info - no such comparable info exists for other players that I can find. You'd think Creative or Sandisk or SOMEONE else would be posting sales figures, at least.)


            As for the fools who use Amazon sales ranking to support their arguments for EITHER side : morons. Morons, morons, morons.
            Take your inclusion in that set as you will.

            Likewise, comparing a portable DAP and a DMP set-top box is kind of like comparing sales of desk lamps to pencil sharpeners. They're both office supplies, yeah, but how else do they compare? Why is the AppleTV relevant in your comparison, being a device that doesn't have much of an existing market (unlike the Zune in the preexisting and maturing DAP market)?
            JoshNorton
        • Again with the AppleTV?

          Boy, you're clinging to this assertion like a drowning man to a floating log.

          Here's a hint - try comparing the Zune to products that it's actually similar to (like,say, other MP3 players), and you won't sound like such a zealot. 'Cause right now it sounds like you're gulping Kool-Aid like there's no tomorrow.
          JoshNorton
      • How many have you seen check them out?

        LMAO, that's the best rebuttal you have? How about the real argument I posed?

        [B]In any case, when MS is not spinning anything in the most positive way, you really have to ask yourself how bad is it?[/B]

        or, can you dispute this?

        [B]It is also one of the plainest players (looking) I have ever seen.[/B]

        I mean, MS put such a positive spin on it's OOXML failing to be fast tracked to the point that some news agencies actually thought they won? You know MS has an excellent PR department.

        TripleII
        TripleII-21189418044173169409978279405827
        • Actually you have a lot to prove yourself...

          Actually if you read the mkt rags it's not that bad. No worse than any other player out there. I'm not stupid enough to buy player for it's looks. What a dumbass move, I buy it for 1) features and 2) price, period. If it looks good it's a bonus, if looks mattered why are there so many skin cases out there. And so does Crapple. And I haven't see you post a real argument yet.
          ItsTheBottomLine
      • The sales of iPods, apparently,

        was not enough to save CompUSA. I am surprised there is one still open near you.

        There was only [b]one[/b] in the entire state I live in left open.
        GuidingLight
      • You are right of course one can't take a single person's

        experience as the rule of thumb. However one can not discount "word of mouth"
        and "popularity" when considering devices like the iPod and Zune. If people are
        not talking about it then that can not be a good thing. If you don't see it in
        people's hands being used then it gets not street cred. If it's not hot then it's just
        not...heh heh heh. I live in a small city in upstate NY and to date one the street (I
        walk a great deal) and at work I've yet to see a Zune in use. Seen plenty of iPods
        of various sizes and a few Zen's. Does that mean anything? I can't say a lot but it
        has to mean something....

        Pagan jim
        Laff
        • Good point but...

          when the Zune is as old as the iPod then you can make comparisons. So mark your calendar and when the same number of years and generations as Apple calls it passes then make your comparison.
          ItsTheBottomLine
      • What are talking about - that is scientific to him...

        ...and everyone should believe sheesh
        ItsTheBottomLine
      • Retail space is a consideration, though.

        The amount of shelf space that retailers like Target have been giving the Zune and its acoutrements has been shrinking, though. iPods and their associated product still get endcaps on a not-infrequent basis, while the Zune got shuffled to a shelf display with less and less space for it and its associated product within a few months of its launch.
        Yeah, this isn't hard evidence, but it is pretty widespread observational evidence.
        JoshNorton
  • grading on a curve

    [i}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.[/i]

    So when Microsoft turned their back on all of there PlaysForSure partners, the payoff was that they would have a better integrated service. But now a year later they still can't offer media that works with their device. Forget the fact that the Zune is a big ugly brick, Its failure of functionality is the reason why it hasn't taken off.
    Tigertank