Or Why the Zune will Fail
I recently received an iPod Nano as a gift and I’ve come to one conclusion: hard disk players are doomed.
There’s something about the smallness, lightness and freedom that comes with carrying/using such a small, skip-resistant player that anything else seems prehistoric. It’s no coincidence that the TV ads for the Nano show shadow people carrying the Nano dancing with freedom.
Freedom. That’s the key word.
Microsoft chose to enter the market at the top end, using dead-end technology. The wifi’s not a bad idea, but the uses are greatly limited by Microsoft’s willingness to sell their ass to RIAA. Also, wifi is a battery hog, killing the battery life of the player. The result is a good idea badly implemented, due to incompetence and the lack of good battery technology.
Without a flash-based player, Microsoft will fail.
One very sad comment I read from an analyst interviewed by BusinessWeek:
And which stocks should investors avoid?
We think investors should avoid Creative Technology (CREAF). We downgraded the stock on Oct. 31 from 2 STARS (sell) to 1 STAR (strong sell). It derives 70% of sales from the MP3 player market, and competes with Apple and Microsoft, which will launch its player in mid-November.
Creative is in a difficult market position going against these behemoths with a lot of resources, and it’s not making money. We expect the company to lose money in fiscal 2007 (ending in June) and in fiscal 2008 as well. Moreover, it has been reducing its level of R&D spending because of the difficulties, which we view as a major red flag. If you’re in this business, we believe you have to keep innovating in order to spur demand for your products. Our 12-month target price on the stock is $5.
This is so sad. How did Creative get here? From declaring war on Apple to having to cut even R&D, which is the basic lifeblood of any technology company. This will be an interesting business case study for years to come. The moral of the story is NEVER partner with Microsoft, they will not hesitate to shaft you up the ass if they think it is in their interest to do so.
