At the annual Microsoft analyst conference, the software giant unveiled plans to spend hundreds of millions of dollars investing into its new Zune portable music device.

Over the next few years, Robbie Bach, the president of Microsoft's entertainment and devices division, said the company will invest hundreds of millions into the Zune.

Microsoft's so-called iPod killer is meant to take a bite out of Apple's 75 percent share of the MP3 player market in the United States.

Microsoft is clearly not happy with Apple's dominance in digital music, Michael Gartenberg said, VP & Research Director at Jupiter Research.

The entertainment division, the segment of Microsoft developing Zune, is expected to incur losses in 2008 due to heavy investment in spite of over $2 billion in sales in 2007.

Bach also said the company plans to take a more integrated approach with Zune, similar to Apple's model of controlling both the hardware, with the iPod, and software, with iTunes.

We will be involved in hardware, software and services. We have to tie those things together like we have in the Xbox world, said Bach.

Microsoft makes the Xbox game consoles and additionally, creates the software as well. The Xbox Live platform allows owners to connect to an online network with other users, pitting them against each other in games.

Bach said the company views Zune as more than a portable music player, rather as a tool that will complete Microsoft's footprint in the digital living room, or how digital movies, music and other forms of entertainment are stored and used in the home.

Put all those things together and then take Zune and put it in context of that, he said. It enables us to complete the picture. The experience of having Zune in that connected environment is going to be a dramatically better experience than just having a portable music player.