According to the Financial Times Microsoft will launch their own replica of the iPod and iTunes to try and become the Pepsi of the digital music market to Apple's Coke!
If true, this will deliver a massive strategy change by Microsoft as well as introduce the first real challenge to Apple's iTunes and iPods. The strategy change is because Microsoft will in effect be admitting that a software only approach does not work in certain consumer electronics markets.
First they cracked by launching the Xbox and for the first time ever built an all Microsoft product from scratch that seamlessly integrated software and hardware. Now they agree that Apple's hardware and software together approach makes a digital music player work better and simpler.
It also allows the product to build a single and more powerful brand for the user. If Microsoft admit that consumer electronics products that integrate hardware and software together are better this could have huge implications for other sectors of the market, including PC's and mobile phones.
Will Microsoft launch their own PC and mobile phone one day? Quite possibly.
Microsoft's move into the digital music market will also deliver a major innovation - wireless downloads. This is extremely smart and has to push Apple to deliver a wireless iPod possibly before Xmas this year - something we have been pushing for a long time.
Either way, it looks like the digital music market and possibly also the consumer electronics industry is in for some major changes and a formidable new competitor.