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Microsoft splits Zune team; moves hardware, software groups into other divisions

13 February, 2009 (17:18) | zune news | By: Harvey Chute

Microsoft has split the Zune team into separate hardware and software units, and folded those units into other Microsoft organizations, according to a CNET report.

The move seems to further signal a shift in  Microsoft’s focus from Zune hardware to Zune software and services. The software group is going to the Media Center TV division, led by Enrique Rodriguez.

The fact that the Zune team does not exist as a separate entity any more is concerning to me. This does not seem a strategic measure for Zune so much as a cost-cutting measure. (They’re not doing this with Xbox, after all.)

The official reason, from Rodriguez, is that the reorganization was about “bringing more heads together to work on a unified entertainment approach… a more cloud-based approach.”

It smells like a cost-cutting move to me. Collapsing organizational units into a smaller set can cut a lot of overhead costs. In a different fiscal environment, I doubt that Microsoft would be doing this. Rodriguez’s comment is telling: “We’re just being very pragmatic and even more so in a world in which not even Microsoft can afford to over-invest.”

It also seems apparent that Microsoft feels it has more to gain from Zune software and Zune Marketplace than it does from Zune hardware. As Zune software and services extend into other 3rd-party devices, the software grows in importance and the Zune player ceases to be the centerpoint of the Zune strategy.

There’s one variable that could change this: how well the next Zune player is received. I mentioned before the excitement that I’m sensing from the Zune hardware team about this. And the new player line will almost certainly come out this fall. That might not change the emphasis on Zune software, but it could ensure a continued focus on Zune players in the years to come.

As Rodriguez notes, “The reality is, [the Zune player] will continue to be the one vertical device that we control every…aspect of it all the way to what it says on the box,” he said. “So shame on us if it is not the best.”

And here’s the word from Brian Seitz of ZuneInsider (emphasis mine): “For our current customers, this internal, organizational adjustment won’t result in any changes. Like I said above we’re still committed to delivering the next wave of the Zune hardware, software and services – and we will do so this calendar year, so stay tuned.”