Microsoft may attack the iPod head-on with a device that not only plays music and videos but also games, according to an article at BusinessWeek. Jay Greene reported that the company hasn't decided whether or not it will go forward with such a product, which is apparently being mulled by a team put together for that reason.

"Going forward with it would be an acknowledgement that the current strategy isn't working," Mr. Greene wrote. He noted that NPD Group's latest figures show Apple's 2005 market share for portable media devices at 67%, up from 52% the year before.

He also cited comments from Peter Moore, who runs Microsoft's Xbox 360 business and who said: "It can't just be our version of the iPod ... I think the [Xbox] brand is an opportunity." Mr. Green noted, however, that an Xbox portable device might be seen by consumers as nothing more than a game machine, which "might limit its appeal."

The reporter also pointed out that Microsoft also runs the risk of alienating the partners it currently works with. "What Microsoft was trying to build will collapse," Sim Wong Hoo, Creative's CEO, told Mr. Greene.

If Microsoft is to succeed, Mr. Greene said that the company will have to aim for a "soup-to-nuts approach" similar to Apple's iPod, where the company controls the hardware and the software. That, he explained, is the only way it can compete with Apple for control of consumers' living rooms.

Thanks to iLounge for the link.