That report comes courtesy of Bloomberg, and I've reached out to Microsoft for some confirmation. If true, the news should come as a surprise to exactly nobody, considering how the player failed to make a dent in the Apple iPod's reigning market share.
Bloomberg's report suggests that Microsoft will continue to bake its Zune software into Windows Phone 7. This is essential, because the Zune-branded storefront is Microsoft's hub for music and media purchases. Microsoft apparently plans to keep manufacturing the existing Zune HD, without releasing new-and-improved versions.
The improvement in smartphones' capabilities (and battery life) has seen a corresponding decline in the need for separate, portable media players. Even Apple has seen sales of its traditional iPod fall over the past several quarters, a phenomenon the company attributes to the rise of the iPhone and iPod Touch. That trend is less to blame for the Zune HD's death, however, than an anemic marketing campaign by Microsoft, coupled by a failure to persuade consumers that their device represented a value-add over the iPod.
The Zune HD attracted some strong reviews in the wake of its September 2009 release. Personally, I thought it a solid piece of hardware with a nifty software interface, and something that probably should have gained more market share than it did. If it's truly dead, then R.I.P.
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