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Microsoft confirms Zune HD coming this fall

The new device will feature an HD Radio tuner and OLED screen, but will it be enough to take on the iPod Touch? Also, Microsoft is rebranding Xbox video service with Zune name.

Microsoft on Tuesday confirmed its plans to take on the iPod Touch with a new, touch-screen Zune that will be able to surf the Web, play high-definition movies, and tune in to digital radio.

The Zune HD, which will be available in the U.S. only starting this fall, features an HD Radio tuner as well as an organic light-emitting diode (OLED) touch screen, Microsoft said. It is based on Windows CE and will use a version of Internet Explorer customized for its touch screen, Microsoft said.

The software maker did not announce pricing or capacity, though it said the device will use flash memory and attempt to take on Apple's high-end iPod models.

"This device is created to go head to head with the iPod Touch," Chris Stephenson, general manager of global marketing for Microsoft Zune, said in a telephone interview on Tuesday. Zune buyers will also be able to play HD content on their TVs via a dock, Microsoft said.

The software maker also said that at next week's E3 trade show in Los Angeles it will announce details on a new Zune-branded video service for the Xbox that will replace the current Xbox Live marketplace for TV and movies. The company didn't announce details or specifically say that content will be playable on both Zunes and the Xbox.

Currently videos purchased via the Xbox can't be played on a Zune, although both stores use a similar back-end infrastructure to serve up content. Over time, Stephenson said the goal is to move toward a world in which content purchased once can be played on a variety of devices.

Microsoft plans to offer the new Zune video service in a number of European markets, in addition to North America.

Microsoft's Zune HD will be released this fall in the U.S. The software maker has not announced pricing or capacity. Microsoft

As for the Zune HD, Microsoft is doubling down on its bet on a radio tuner as a distinguishing feature. Stephenson noted that the current Zune's FM radio is its second most popular selling point. Adding support for HD Radio, a free over-the-air digital radio technology, represents both a risk and opportunity.

"It's really one of the first portable HD radio receivers out there," Stephenson said. "It's going to be important for us to communicate the value of HD Radio since it is a fairly nascent technology."

One of the big unanswered questions is what sort of gaming abilities the Zune HD will have. There has been speculation on the topic, but Microsoft refused to comment ahead of E3 saying it had no details to share at this time.

Microsoft plans to continue selling its hard drive-based model, which will have a software QWERTY keyboard, but said it plans to eventually discontinue its other flash models in favor of the Zune HD.

"Expect to see the Zune HD...become the definitive Zune product going forward," Stephenson said. "You will continue to see the hard drive product in the market. (The Zune HD) will take over from existing flash devices."

Although Microsoft has said it isn't building a ZunePhone, the company does want to be able to offer its Zune service on phones. However, Stephenson said that is a longer-term goal that will take at least until next year to fulfill.

"This is enough work for us this year," he said. "Going forward, Zune will start to surface on multiple platforms across the ecosystem. Expect to see it pop up in many different places."