The device which is tipped to be launched in Australia in time to capture Xmas sales will be backed by a major marketing campaign.
 It is not surprising that Toshiba is the organisation that Microsoft will partner with for the new player as one other contender Creative Technology is bleeding losses despite a $130 million windfall from Apple for alleged patent infringements.
Toshiba is the initiator and most important adherent of the HD DVD format, at which Microsoft also adhered. The software giant even announced a separate HD DVD player by the end of the year, for the popular Xbox 360 console. So the pact between the two giants is somehow normal.
Moreover, Microsoft has made a pledge to release a "Zune" MP3 player and matching online music and video store in time for the yearend holiday shopping season.
Kyrsa Dixon, a spokeswoman for one of Microsoft's public relations firms, confirmed Friday that Toshiba will be responsible with the manufacture of the rumoured iPod killer.
On Thursday, Toshiba had already sent requests to the Federal Communications Commission (FCC) for certifications on Zune. From the FCC specifications, we can find out that Zune will feature a 30GB hard drive, an FM tuner, and a three-inch low temperature polysilicone display screen.
The Toshiba-manufactured MP3 player (mainly that is what Zune is going to be…) will also be endowed with a 802.11b/g Wi-Fi module, an FM radio tuner (some people are reporting it doesn't, but the main FCC report clearly states it does), a 3inch LCD, and a USB 2.0 port to allow for data transfer and to connect to a TV-out dongle which is shown running on a standard TV in the main test report.

"Toshiba has one of the better received portable media centres out there, so it makes sense that Microsoft would have chosen them," said Jon Erensen, an analyst with Gardner. "If you look at the GigaBeat F, one of the new portable media centres that was introduced at CES last year, it was one of the better designed pieces of hardware that was out there, so it's not too big of a surprise that Microsoft would try to work with Toshiba and take advantage of their expertise in that area."

"It will be interesting to see how they handle battery life," Erensen said. "When you start in putting wireless and a big screen, it tends to tax the power requirements."

Apparently "DJ" has become a verb, because the Zune will have wireless LAN so that users can "DJ" their songs, or beam them to each other's devices. Users can also "DJ" photos, album art, entire albums, and play lists. The network, called Plyxis, allows users to scan any available content around them or turn off their device so their content is private.

According to the user's manual submitted to the FCC, "Pyxis allows you to stream music to up to four other Pyxis devices. If you wish to 'DJ' content to other devices you need to go either to settings/music or press the center button in the 'now playing' screen. You will be presented with a DJ setting with three options: off, on, or friends. If you chose DJ: on, anyone (max four at one time) can listen in to the same music that you are currently listening to. If you chose DJ: friends, only people in your friends list can listen in. If you choose DJ: off, no one can listen to your music but you can still tune in to other people who have their DJ setting turned on." (Note: This excerpt was changed for grammatical editing.)

"I'm eager to see what these wireless features can do," Erensen said. "That's definitely going to be one of the big capabilities in that it allows for social networking. It seems that Microsoft really seems to be pushing that feature."

"Toshiba makes a very high-quality product," said Rob Enderle, an analyst at the Enderle Group in San Jose, Calif. He called the decision "a good choice" and said Toshiba's Gigabeat music player is often reviewed as one of the few devices whose hardware is equal to or better than the iPod.

But what if Zune turns out to be the Gigabeat killer instead of becoming THE iPod killer? Or what if Zune won't convince as much as Gigabeat did, and proves itself (along with the other entertainment devices promised by Microsoft) a total fiasco?

One similar situation occurred when Gillette launched its famous Mach 3 series, and it did not sell because the previous product, the Sensor Excel, was very good too. Could this happen to Zune or will Zune manage to finally achieve its purpose of killing the iPod?

Either way, Toshiba seems to be a winner. But risks are involved. They'll lose money if Zune becomes a massive success (in Gigabeat's detriment) but in that case, they'll probably recover that money from Microsoft's orders for Zune (and they'll probably think of stopping Gigabeat's production). If, on the other hand, Zune fails, they'll still win money from already-made orders and they'll also have the Gigabeat alternative on the MP3 market.

It all depends on Zune's success: Microsoft will eventually decide to manufacture it "in-house" if it meets its objectives, sending both Gigabeat and Toshiba's hopes in the MP3 market into oblivion.