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Presumably Redmond has tired of the failure of Apple's rivals to make any significant inroads into the iPod's huge market share.

Contrary to industry expectations, Apple's dominance of the digital media market is growing and, as BusinessWeek notes, Apple's so-far successful venture into video has given Redmond little option if it is not going to surrender the living room - where many see the future of computing going - to its rival.

However, taking on the iPod will not prove easy, not least because Microsoft has little hardware pedigree. Moreover it risks alienating its current partners.

'Everybody will try to do their own thing to differentiate,' said Sim Wong Hoo, chief executive of Apple's closest competitor, Creative. 'What Microsoft was trying to build will collapse.'