Microsoft, partners to challenge Apple iPod--Gates

Microsoft Corp. (Nasdaq:MSFT - news) and its hardware partners will continue to develop new digital media devices aimed at challenging the dominance of Apple Computer Inc.'s (Nasdaq:AAPL - news) ubiquitous iPod music player, Chairman Bill Gates said on Friday.

"I don't think what's out on the market today is the final answer," Gates said, speaking to a group of minority students. "Between us and our partners, you can expect some pretty hot products coming out over the next few years."

The Microsoft founder praised Apple's iTunes music store and said the software giant was talking with hardware partners to create media devices that can be less expensive and easier to connect and can handle pictures and video better.

Gates said the market share for digital music players compatible with Microsoft software is around 20 percent, a figure that is lower than he would like.

Microsoft's strategy has been to allow various device manufacturers to create players that would be compatible with its software, arguing that it offered consumers more options.

However, BusinessWeek reported last week that Microsoft is mulling its own media device in an effort to cut into Apple's nearly 70 percent U.S. market share. The company declined to comment on the article at the time.

Gates did not disclose any plans for a Microsoft-branded device on Friday and alluded often to working together with partners for future media devices.

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