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Zune sales plummeted during holidays

The software maker noted in its SEC filing that its Zune sales were down by $100 million, or 54 percent, from where they were a year earlier.


There were plenty of weak spots that led to Microsoft's disastrous December quarter, but one that didn't get much attention Thursday was how badly the Zune did.

Tucked away in Microsoft's quarterly filing with the Securities and Exchange Commission, however, was a startling figure.

"Zune platform revenue decreased $100 million, or 54 percent, reflecting a decrease in device sales," Microsoft said. That's quite a drop.

Apple, by contrast, saw its iPod unit sales up 3 percent, while revenue dropped by 16 percent. It still racked up $3.3 billion in revenue, as compared with less than $100 million for the Zune.

In an interview Friday afternoon, Zune marketing director Adam Sohn said a number of factors were to blame.

"It's the category, it's the business, it's the economy," Sohn said, noting that despite a software upgrade, Microsoft entered the holidays with essentially the same hardware it had a year earlier.

In November, Microsoft chopped the prices on its flash-based Zune devices amid both competitive and broader economic pressures.

That meant that revenue was somewhat lower than Microsoft had projected, although Sohn insisted that unit sales were basically in line with what the company had figured on.

"We met our internal plan for (the) holiday," he said, adding that a year ago the company was also boosted by strong sales of a heavily discounted, older 30GB hard drive-based model.

With Microsoft announcing a variety of big cost cuts on Thursday, there were plenty of people suggesting Microsoft should just exit the Zune hardware business entirely.

This posted was updated at 4:20 p.m. PST with comments from Microsoft.