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Should Microsoft kick the Zune to the Island of the Misfit Toys?

According to an SEC filing, Zune revenues during Q4 08 fell by a whopping 54%. In cash terms that represents a drop in revenue of $100 million. Is it time for Microsoft to kick the Zune to the Island of the Misfit Toys?

According to an SEC filing, Zune revenues during Q4 08 fell by a whopping 54%. In cash terms that represents a drop in revenue of $100 million. Is it time for Microsoft to kick the Zune to the Island of the Misfit Toys?

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The problem is pretty easy to understand. Apple commands a good 70% of the US media player market. With that kind of market share, Apple managed to increase revenue last quarter by some 3% during the same period. Microsoft is stuck scrabbling for revenue in that remaining 30% of the market. The drop in revenue is a clear indicator that the Zune doesn't feature highly in the thoughts of those looking for a new media player. Apple entered these tough economic times with a halo over the iPod. Microsoft didn't, and it's paying the price.

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It's not all bad news for Microsoft's Entertainment and Devices Division. The Xbox and PC platform revenues grew by 6%.

Is the Zune viable or should Microsoft just pull the plug on it and concede defeat to Apple?