Should Microsoft make its own iPod challenger?

LAS VEGAS – They run on Microsoft software, and sport the Microsoft Windows logo, but three new iPod challengers unveiled by the company this week also have something else in common: Microsoft doesn’t make them.

The portable media centers – to be offered by Toshiba, LG Electronics and Tatung – follow Microsoft’s traditional strategy of sticking to software and working with a wide variety of hardware makers. On PCs, the approach has been key to the company’s dominant market position.

But portable media devices are putting that strategy to a new test, and so far the results aren’t anywhere near as good for the Redmond company.

Apple’s iPod has maintained a commanding lead in the market, four years after its introduction. The situation is causing some analysts to ask whether Microsoft would be better off making its own portable media player – breaking with tradition and putting its destiny in its own hands.

"None of its partners have created a device that’s compe-titive yet," said Matt Rosoff, analyst at Directions on Micro-soft, an independent research firm. As a result, he said, "It wouldn’t be a huge surprise" if Microsoft eventually decides to develop and market its own portable device.

Such a move would give Microsoft the advantage of controlling the end-to-end experience, from the music-management software on the PC, which it already makes, to the actual hardware.

That is Apple’s approach, through the tight integration of the iPod and the iTunes software for Macintosh and Windows computers.

But Microsoft would also risk alienating its existing device partners by turning itself into a direct competitor. And some analysts point out that the portable media market is still young. In the long run, competitors could rise to pose a much more serious challenge to the iPod, making the market more like personal computers.

"It would seem like a desperate move" for Microsoft to decide to make its own portable media player at this point, said analyst Roger Kay, president of Endpoint Technologies Asso-ciates.

"Having lots of partners together is actually one of their key strengths," Kay said of Microsoft. "Actually, I fault Apple for not doing that sort of thing."

Officially, Microsoft says it doesn’t plan to come out with its own media device.

"We’ve got great partners, building great devices, so we don’t see a need to do that," said Peter Bernard, group manager for Microsoft’s Portable Media Center unit.

The latest portable media centers were unveiled during Bill Gates’ keynote address at the Consumer Electronics Show here. Microsoft says the new devices from Toshiba, LG and Tatung are smaller, more advanced and less expensive than their predecessors.

The Toshiba S Series "gigabeat" portable media center, due out in March, will cost $299 for a model with a 30-gigabyte hard drive. A 60-gigabyte version will cost $399. Those are the same prices as iPods with the same hard-drive space.

Microsoft says that one advantage of supplying the portable media center software to several different hardware companies is that each can use that software in different ways, adding whatever features it sees fit. That, in turn, creates a broader range of choices for consumers, the company says.

But even with the unveiling of the new devices, changes in Microsoft’s internal structure have fueled speculation that the company might be toying with the concept of coming out with its own portable media device. — Seattle Post-Intelligencer