Microsoft’s (NASDAQ:MSFT) Zune competes with Apple’s (NASDAQ:AAPL) iPod suite of products and SanDisk’s (NASDAQ:SNDK) Sansa in the music and video player market. Microsoft CEO, Steve Ballmer, touted the new device a future rival to the iPod when the device was launched in 2006. A few years later, Microsoft will stop introducing new versions of the Zune music and video player because of the tepid demand according to Bloomberg. [1]
We have made the update to the Microsoft model after this news, which leaves the price estimate nearly unchanged for Microsoft stock at $31.64. The XBox and Zune combine to account for only 1% of our estimate for Microsoft stock. However, our price estimate is about 25% above market price. We estimate that Windows Operating System and Microsoft Office combine for around 75% of the company’s value.
Microsoft Zune Struggles Continue
Even before this report, Microsoft Zune sales failed to pick up, and we believe it maintained a low market share of around of 0.5% in the music and video player market through 2010. Microsoft’s only chance of maintaining market share was to keep releasing newer versions of Zune that consumers might find more compelling. However, now Microsoft will only be selling the existing versions of Zune. This means that its market share could continue to decline to almost zero levels in a few years from now.
See our full analysis and $31.64 price estimate for Microsoft
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