Rumor: Microsoft Developing iPod Killer

NewsFactor Network reports new rumors are circulating that "Microsoft (MSFT) has started laying the foundation for new products that will challenge both the Apple (AAPL) iPod and the iTunes online music store."

Reuters first reported on Friday that "the software giant is going through all the motions of creating a new device and music platform but will not confirm its plans." According to sources, "the company has put Xbox guru Robbie Bach in charge of the project."

Mike McGuire at Gartner said, "To challenge the iPod and iTunes, Microsoft will have to create a really compelling experience for users, and the device itself has to be fun and interesting and attractive. The individual components and attributes are not as important as the total usage experience."

Based on past history, don't expect version 1 of the phantom product to be all that. However, Microsoft does learn well and with its vast resources, version 2 and beyond could be compelling enough to take on Apple....