Microsoft's decision to price its Zune portable media player at $249 means the company will lose money on every sale, an analyst claims.

American Technology Research analyst Sha Wu warned clients that: "Zune will likely see some modest success due to Microsoft's vast resources and strong brand, but at the expense of its Windows partners."

Once again, Wu warns that Apple is less likely to be harmed by Microsoft's foray into the market than existing Microsoft partners are.
"We believe Microsoft not pricing lower demonstrates Apple's under-appreciated scale and supply chain strength; where Microsoft will lose money (we estimate $50 per Zune) against Apple's industry-leading iPod profitability in what we estimate to be an 18-22 per cent gross margin and 8-11 per cent operating margin."

The analyst maintains his 'Buy' rating on Apple stock with a $91 target price. He remains to see "whether Zune, priced in-line with a vPod, will take share, with its bulkier form factor, same Windows user interface and software currently available from 15-20 vendors, and inferior battery life."