Microsoft will not make a Zune mobile phone, says analyst

Chicago (IL) - Speculations about possible Zune-branded mobile phone from Microsoft have been discussed in the blogosphere since the iPhone was introduced last June. Microsoft on its part has avoided confirming or denying these rumors (which is usually an indication that such a device is in the works) but analysts warn that the software giant would jeopardize 20 million Windows Mobile licenses if it decided to make the Zune handset.

Jupiter Research analyst Michael Gartenberg is one of those analysts who think Zune handset would be a bad idea. In a recent post on his blog, the analyst cites different business model behind Windows Mobile and the alienation of its hardware partners when it decided to market its own music player as primary reasons. "The business model of Windows Mobile is totally different than Zune," Gartenberg writes. “Zune worked to some extent since the technology Microsoft was licensing wasn't getting them anywhere. As it was, hardware partners were taken aback by Microsoft's actions but were still comfortable licensing."

Gartenberg thinks that jeopardizing the traction it now has with the Windows Mobile platform would be a risky move. "No one has ever been successful licensing technology platforms to others and then competing with a device of their own," he said. "Apple failed (twice), Palm and Nokia all tried it and it just can't be done. Microsoft now has traction with more than 20 million licenses out there and a great stream of partners and new phones for consumer and business use."

Even if Microsoft decided to make a Zune handset, the company would face similar obstacles that limited Apple's iPhone efforts. One of the difficulties is the fact that there is no market for unlocked phones in the U.S., unlike Europe where customers can pick any handset they like, get it unlocked (in most cases) and then choose the carrier of their choice. "Just ask Nokia how hard it is to sell a high end phone with no carrier," said Gartenberg. He thinks that some Zune functions could end up in future versions of Windows Mobile, similar to how iPod-related features ended up in the iPhone software.

His take is echoed by a recently leaked Steve Ballmer memo that announced an important change in the direction for Microsoft.

According to the company’s CEO, the software giant will work more closely with its ecosystem of hardware vendors in order to provide tighter interplay between software and hardware. "Today, we're changing the way we work with hardware vendors to ensure that we can provide complete experiences with absolutely no compromises. We'll do the same with phones - providing choice as we work to create great end-to-end experiences," Ballmer wrote to his troops in a leaked memo.

We would agree that a Zune phone would be a questionable move - as was the whole Zune player launch (especially the ugly brown version of the bulky device.) We would even go one step further and bet that (contrary to Microsoft's claims that Zune is part of a long term strategy) the device as we know it today will be removed from the market in the not too distant future. Instead, a portable multimedia-playback-gaming device a la Playstation Portable would make much more sense.