Microsoft Corp. officials made official last Friday that the software giant is readying a portable music device, quelling rampant speculation. Though the new device, dubbed Zune, benefits from the technical expertise and financial backing of the software-giant, it needs more than technical success to hurdle competition.

The most formidable competition Microsoft faces comes from long time rival, Apple Computers. Apple's iTunes/iPod juggernaut is currently responsible for about 70 percent of the digital music market and 75 percent of the portable digital music player market - selling over 8 million iPods last quarter alone.

Microsoft is clearly not happy with Apple's dominance in digital music, Michael Gartenberg said, VP & Research Director at Jupiter Research. The Redmond-based company is not looking for new growth, he continues, but more concerned that Apple controls key areas of the digital home. That scenario doesn't bode well for Microsoft's larger ambitions.

Microsoft must not only create a technically competent device to challenge the iPod, but it must create a complete solution that can uproot the established culture that Apple has planted. Microsoft is clearly going to face a battle here. Gartenberg states.

Apple's shown the way on what features the market wants, but less obvious is how Microsoft will differentiate themselves.

One way they are trying to do that is to distance the device from the Microsoft brand, but instead market it as part of the more youth-appealing Xbox brand. It's good that they're building a unique brand and following the Xbox tradition, but Gartenberg admits it's going to be hard for them to create the same level of cachet that Apple has with the iPod.

The software giant also needs to build a healthy platform around its new device to contend. The iPod is a platform in and of itself with a host of accessories, add-ons and content. Given its financial backing and industry partners, Microsoft will go a long way to create this same aura, but the ultimate choice goes to the consumer, Gartenberg contends.

It's likely that by force of will and spending lots of money on marketing with a high cost of acquisition on new users, they can capture some market share. But the real losers be the likes of Creative, iRiver and others who failed in capturing market share from Apple, but now find themselves facing Apple and their former partners, Microsoft.

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