Microsoft Corp. unveiled on Thursday its new Zune portable media player, hoping its ability to share music wirelessly can win over consumers despite its late entry five years after Apple's market-dominating iPod.

The world's largest software maker said the music player is the first step in creating a whole brand of portable devices, and a Zune mobile phone is also in the company's plans.

Microsoft said it will launch a 30-gigabyte Zune and an iTunes competitor called the Zune Marketplace in the United States this holiday shopping season.

The new rectangular player, which was handed to reporters at a news conference, is similar in appearance to the iPod, with a round click wheel but a larger 3-inch screen. The Zune comes in black, white and brown.

Microsoft did not give a launch date or pricing, but said the Zune's wireless connectivity feature, which allows users to beam photos and songs to one another, will differentiate it from Apple Computer Inc.'s popular iPod.

Analysts said the wireless feature, currently unavailable in the iPod, will attract some customers but market share gains will probably come at the expense of other music player makers like Creative Technology and SanDisk Corp.

Zune isn't an iPod killer but it does offer some compelling features that Apple currently lacks, said JupiterResearch analyst Michael Gartenberg. It still looks like short term market share will come from other device vendors, not Apple.

The Zune, along with the Xbox game console, is part of Microsoft's strategy to diversify beyond its core desktop computer business, which is facing competition from Web rivals like Google Inc..

Microsoft has to stay relevant to how people are accessing information and entertainment. The desktop is not the center of the world anymore, said Toan Tran, an analyst at Morningstar.

Redmond, Washington-based Microsoft has said it plans to invest hundreds of millions of dollars to develop and market the Zune, while acknowledging that the investment may take years to bear fruit.


Unseating the iPod, which holds more than half of the global digital media player market according to research company NPD, will be no easy task.

Apple has already moved beyond music to start offering movie downloads from its iTunes online media store this week, in addition to a growing collection of television programs.

Movies and television shows will not be available for download when the Zune launches, but Microsoft said it is in talks with major television and movie studios about adding video content to the Zune Marketplace.

Analysts also widely expect Apple to introduce a new gadget next year that they and fans have dubbed the iPhone, which will combine mobile phone features with the iPod.

A Zune phone is definitely part of the future of this brand, said Chris Stephenson, general manager of global marketing for Zune. He gave no specifics.

Zune, manufactured by Japan's Toshiba Corp., will allow users to listen to any shared song three times over a three-day period. It will be preloaded with music from record labels including Astralwerks Records and Virgin Records from EMI Music.

Unlike iTunes, the Zune Marketplace will provide users with the option to either buy a flat-fee subscription to download an unlimited number of songs, or purchase songs individually.

There are billions of people on planet earth who listen to music and (Apple's) sold 50 million gadgets. So we're in this early phase of digital music and portable entertainment, said J Allard, who is heading up Microsoft's Zune business.

Shares of Microsoft rose 35 cents, or 1.4 percent, to close at $26.33 on the Nasdaq, while Apple shares edged down 3 cents to $74.17.