Microsoft said it will launch a 30-gigabyte Zune and an iTunes competitor called the Zune Marketplace in the United States this holiday shopping season.
The new rectangular player, which was handed to reporters at a news conference, is similar in appearance to the iPod, with a round click wheel but a larger 3-inch screen. The Zune comes in black, white and brown.
Microsoft did not give a launch date or pricing, but said the Zune's wireless connectivity feature, which allows users to beam photos and songs to one another, will differentiate it from Apple Computer Inc.'s popular iPod.
However, analysts predicted Microsoft would price Zune to compete with Apple's 30-gigabyte iPod, which sells for 249 dollars.
The Zune MP3 player will also feature a built-in FM tuner and a three-inch (7.6-centimeter) screen designed for displaying music, pictures and video. Zune will be available in black, brown and white.
Zune devices were also designed to connect wirelessly with each other so users could share music or play "DJ," according to Microsoft.
Shared songs would automatically erase from borrowers' Zunes after three days or being played three times, Microsoft said.
"I can give you a song and you can play it three times and it disappears," said Jupiter Research principal analyst Michael Gartenberg.
"Had Microsoft enabled full sharing of unprotected files, that would have resonated much louder with consumers but it would have shut them out from record companies intent on protecting their products."
Zune devices would not connect directly to the Internet and it remained to be seen whether they would connect wirelessly to computers using the new Microsoft Vista operating system to be released early next year.
Analysts also said the wireless feature, currently unavailable in the iPod, will attract some customers but market share gains will probably come at the expense of other music player makers like Creative Technology and SanDisk Corp.
The Zune, along with the Xbox game console, is part of Microsoft's strategy to diversify beyond its core desktop computer business, which is facing competition from Web rivals like Google Inc. .
Redmond, Washington-based Microsoft has said it plans to invest hundreds of millions of dollars to develop and market the Zune, while acknowledging that the investment may take years to bear fruit.
Unseating the iPod, which holds more than half of the global digital media player market according to research company NPD, will be no easy task.
Apple has already moved beyond music to start offering movie downloads from its iTunes online media store this week, in addition to a growing collection of television programs.
Movies and television shows will not be available for download when the Zune launches, but Microsoft said it is in talks with major television and movie studios about adding video content to the Zune Marketplace.
Zune, manufactured by Japan's Toshiba Corp.
Three accessory packs help Zune users enjoy their music where they want to, at home or on the road::
* The Zune Car Pack includes everything needed to hit the road with a Zune device, such as the built-in FM tuner with AutoSeek and the Zune Car Charger.
* Zune AV Output Cable, Zune Dock, Zune Sync Cable, Zune AC Adapter and the Zune Wireless Remote for Zune Dock.
* Zune Travel Pack is a set of five products designed to keep friends and family entertained on the road: Zune Premium Earphones, Zune Dual Connect Remote, Zune Gear Bag, Zune Sync Cable and the Zune AC Adapter.