Microsoft's New Zune Offering Priced Below iPod Touch

   DOW JONES NEWSWIRES 
 

Microsoft Corp.'s (MSFT) began accepting preorders for its next-generation Zune HD media player on its Web site, at a significantly lower price than rival Apple Inc.'s (AAPL) iPod.

The first Zune appeared in late 2006 but has struggled to chip away at the iPod's dominance. While Apple has morphed the iPod since its 2001 debut into a range of models including the Internet-enabled iPod Touch, Microsoft has so far limited the Zune to a few different devices, distinguished only by size and storage capacity.

Expected to hit stores Sept. 15, the new model will change that, with an iPhone-like touch screen, Internet browser and high-definition video. The device also offers H-D radio, which is not available on the iPod touch.

The 16-gigabyte model is making its debut at $219.99, compared with $299 for the 16-gigabyte iPod touch. The Zune's 32-gigabyte model is set at $289.99, while the comparable iPod touch is priced at $399.

And while the earliest iterations of the Zune were mocked in some quarters for their relatively bulky design, the newest Zune will boast a sleeker, edgier aspect, according to images posted on a company Web site.

In-person preorders will be accepted starting Sunday at Best Buy Co. (BBY) stores, with previews available in some cities on Aug. 22 and 23.

Microsoft shares were flat at $23.53 in recent trading.

-By Tess Stynes, Dow Jones Newswires; 212-416-2481; [e-mail]