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Thursday, July 6, 2006 - Page updated at 12:00 AM

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Microsoft plans for iPod rival to be launched by Christmas

Bloomberg News

Microsoft is planning to have a portable music and video player out by Christmas in a challenge to Apple Computer's iPod.

The digital player will have a wireless Internet connection, enabling users to download music without being linked to a computer, a feature the iPod doesn't offer, according to people briefed on the company's plans.

Microsoft is seeking to take away market share from Apple's iPod, which commands 77 percent of the $4 billion U.S. market for digital music players, based on figures from market researcher NPD Group. Apple's iTunes music store is used for 72 percent of music downloads. Since Apple Chief Executive Officer Steve Jobs introduced the iPod in October 2001, the company has sold more than 50.8 million players.

Microsoft has spent the past six years relying on partners to make players that use its software.

But "none of Microsoft's partners are doing the job that needs to be done," said Michael Gartenberg, an analyst with Jupiter Research in New York. "Apple has set it up so Apple music flows only to Apple devices. It locks Microsoft out and gives Apple more of a hold."

Microsoft hired music-industry executive Chris Stephenson, who is among Microsoft officials who have met with music and Hollywood companies to seek licenses for their content, according to industry officials with knowledge of the plans.

Sally Julien, a spokeswoman for Microsoft, declined to comment, as did representatives of the music companies and TV networks.

Microsoft's device will be able to connect to the Internet and other devices using the Wi-Fi standard, which iTunes doesn't have, the people said. Microsoft is also promising the screen will have a better quality picture than the iPod, according to the people, who saw the slideshow Microsoft is using to promote the device.

The music and TV companies are interested in working with Microsoft in order to blunt Apple's power in the market, according to people close to the media companies.

Microsoft Xbox Vice President J Allard is overseeing the development of the company's digital player, the people familiar with Microsoft's plans said. It also is being developed under the supervision of Robbie Bach, who leads the unit that produces the Xbox video-game console. Microsoft Chief Executive Officer Steve Ballmer last year tapped Bach to take on the added role of overseeing Microsoft's music strategy. With the Xbox, Bach had overseen the most significant of Microsoft's few forays into building its own hardware.

"This would not be the first time Microsoft has decided it needed to take control of its own destiny with regard to hardware," Gartenberg said. "Not coincidentally, the last time they did that it was in video games and the guys doing it were named Robbie Bach and J Allard."

Copyright © 2006 The Seattle Times Company

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