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Microsoft to Update Zune Line

It's expected to add two flash-based players.

SAN FRANCISCO -- Microsoft (MSFT) - Get Microsoft Corporation (MSFT) Report is expected to unveil three new models of its Zune multimedia player late Tuesday.

A source who asked not to be named said the company would announce two flash-based players and a larger-capacity hard-disk model. Some features will also be added, but none that would threaten the dominance of


(AAPL) - Get Apple Inc. (AAPL) Report

iPod players.

Microsoft's player has lagged the iPod in both buzz and sales. The Redmond, Wash., software company reported in August that it had sold 1 million Zune players since its launch in December.

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By contrast, Apple sold 9.8 million iPods in just the third quarter of 2007, a 21% increase year over year. The company has sold over 100 million of the popular music players since their launch in October 2001. In September,

Apple released new models , including the iPod touch, which has touch-pad sensitivity like the iPhone.


cut the Zune's price by $50 recently, apparently to make way for newer models. At the time, Microsoft executive Mindy Mount said upcoming models would likely bring new "form factors" and address design deficiencies such as its weight.

After hours, Microsoft shares were unchanged at $29.70.

The company is beefing up its offering of Microsoft-branded hardware devices fully integrated with its software, as well as selling operating systems for device manufacturers, such as Windows Mobile software.