In light of the news of the massive layoffs Microsoft has planned, word has been trickling out about which divisions will be hit the hardest. The Zune division is probably fairly high on the list due to its poor sales performance during the 2008 holiday season.
As we heard yesterday, Microsoft is laying off staff in its Entertainment and Devices Division (EDD). The EDD houses various departments such as the Zune, PC Gaming and Xbox division. We already know that ACES, a veteran gaming studio within Microsoft, has shutdown as well as the Gamerscore Blog, which is a company owned website.
Apparently the management team will also undergo an organizational restructure in the coming weeks.
However, one piece of news that seems to have slipped by is how much Zune sales have plummeted in the past several months.
According to Microsoft’s quarterly filings to the Securities and Exchange Commission, the Zune platform experienced a revenue drop of 54 percent, or $100 million. That is a significant drop especially during the holiday season.
This is in contrast to the Apple iPod, which experienced a 3 percent sales increase and a slight drop in revenue. The iPod earned $3.3 billion in revenue in contrast to the Zune’s paltry $100 million in revenue.
Many have started to ask whether Microsoft should just exit the Zune business altogether. With a drop in over half the revenue during the busiest time of the year, things do not bode well for Microsoft’s “iPod killer.”
It is more than likely that the Zune business will receive a good helping of the layoffs and possibly the end of the Zune as well. There are some indications that Microsoft may be putting more focus on its core businesses such as Windows.
The thing about the global financial crisis is that it’s forcing companies to undergo reality checks. Microsoft, by now, should be realizing that it’s never going to be as “cool” as Apple. So why waste its time with the Zune where it has no competitive advantage?