SEATTLE -- Microsoft Corp. plans to add a video-sharing feature to its Zune player and will eventually sell a model that combines the device with a phone, chief executive Steve Ballmer said yesterday.
The video function would probably be used to transfer content created by Zune customers, Ballmer said in an interview from Redmond, Wash. He declined to comment on when Microsoft, the world's largest software maker, would add video sharing or unveil a phone model.
Zune goes on sale today for $249.99 as Microsoft tries to break into the $4 billion US market for portable music devices. Ballmer pointed to Zune's wireless connection as an advantage over Apple Computer Inc.'s iPod, which has 75 percent of US sales.
"The race is on," he said. "I'm confident we can keep up. They have brand and image going for them, and we have some innovative ideas."
Microsoft chairman Bill Gates gave his Zune, a brown model, to an audience member at an outdoor concert by rock group Secret Machines in downtown Seattle yesterday to mark the product's release.
"Zune is a big investment for us," said Gates, who called the device "very cool."
Microsoft shares rose 11 cents to $29.35, their highest in two years, in Nasdaq Stock Market composite trading yesterday.
Apple will probably introduce a new video iPod with a larger screen than the current 2.5-inch model as early as January and enter the mobile-phone market with an iPod phone in 2007, said UBS AG's Benjamin Reitzes in New York.
A JupiterResearch study last month showed cellular phones with the ability to play digital music aren't generating a lot of usage because few customers are interested in downloading music over the air and the phones don't let users load existing digital music collections, according to analyst David Card.
A phone that lets customers load their existing music in a similar way to iPod or Zune devices could have more success, Card said.