At the Consumer Electronics show last week, Microsoft CEO Steve Ballmer basically confirmed that the company was about ready to give up on the Zune, and move back to making software for other devices, namely the iPhone and the iPod Touch:

Mr Ballmer seemed all but ready to throw in the towel on the Zune mobile device, which has failed to gain ground on Apple’s iPod. But he suggested that the focus of competition in digital media was moving onto ground that Microsoft understands well: software.

He said that, with the market for dedicated portable media players in decline, the future lay in more “general purpose” devices – such as Apple’s iPhone and touch.

Asked if Microsoft would counter with a “Zune Phone”, Mr Ballmer said: “You should not anticipate that.”

So, this could be the beginning of the end of the Zune, which has failed to capture much, if any, of the iPod's market share. I'm not so sure focusing on cell phone apps and software is good in the long run (I mean, apps are a dime a dozen), but Microsoft probably stands to lose less money that way. [Valleywag]