Microsoft plans "killer" iPod

Microsoft and its allies moved yesterday to try to halt the seemingly unstoppable progress of Apple Computer's iPod music player, announcing they will offer portable gadgets able to play music and movies in the second half of this year.

The would-be "iPod killers", from companies including the Singapore-based Creative Technology and iRiver of Korea, will use Microsoft's Portable Media Center software ­ which is not yet released ­ and aim to grab a share of the fast-growing digital media player market.

But based on job openings it advertised last year, Apple is rumoured to be preparing its own "video iPod". Unconfirmed reports suggest it will launch the product by mid-year, perhaps with TV and video outputs.

Microsoft's dominance of the desktop PC market has been upended in the digital player market by Apple, which has just a few per cent of the computer market. The iPod commands more than 25 per cent market share by units sold, far more than any other single manufacturer. Apple last year also launched its iTunes jukebox software for Windows, and this month the computer company HP will start selling a rebranded version of the iPod.

The incursion has led Microsoft and the player makers to redouble their efforts to find new ways to attract people away from the ubiquitous white player ­ soon to be joined in Europe by the iPod mini, a cheaper, multicoloured version.

"We think of this as the next evolution in mobile entertainment," said James Bernard, the product manager for Portable Media Center. "We think this is going to be one of the hot devices for Christmas 2004."

Microsoft said the Creative devices would be available in Sweden, Britain and Denmark first, priced between £399 and £449 The Creative players will be able to store 20 or 40 gigabytes of data; the latter would provide 175 hours of video playback, Microsoft said.

Separately, talks between the European Commission and Microsoft broke down yesterday, leaving the software giant facing a fine of hundreds of millions of euros and the possibility it could be forced to sell versions of its Windows operating system with rival media-playing programs included.

Despite the intervention of Microsoft's chief executive, Steve Ballmer, who flew to Europe for talks with the EU Competition Commissioner, Mario Monti, the sides said they could not agree on "commitments for future conduct".

Microsoft said it would appeal against the decision ­ a process that could take years. The EU is also expected to tell Microsoft to reveal details about how its larger server computers communicate with its desktop machines. Windows dominates the desktop, with more than 90 per cent market share, and the EU believes it is using that effective monopoly to muscle its way into the server market.