Cesar, can you clarify that?  What exactly do you mean by "building our own products, but not our own factory"?  I don't understand the distinction.

Bar - we're not constructing a factory, but we are using an existing factory to build Zune

No more Zunes as we know them. :) Zune phone, Zune computing device?

(because Cesar refused to add Zune in his list of hardware devices)

Cesar, can I send you a bunch of JPGs files that got transfered from the Zune software to my Zune but when I view them zoomed and try to pan around I get an error like "the item is missing or can't be played"

I really don't understand this move.  I can't imagine a single competitive advantage Microsoft gains from building the Zune itself.  An MP3 player (even a Zune phone)is not an Xbox - it is an electronic commodity.  Microsoft needs to take a lesson from Apple - the magic in an MP3 player is in the firmware, not the hardware.

what did Mr. Gates told you all last Friday ?

@Marc Cohen:

Who says Apple's strategy is the only one which works?

Imho deliverying a rich hardware platform as a basis to stream a slew of updates to the firmware makes it more appealing to the user.

The Zune has a lot of potential with that fast processor it has packed in. We could very well see it put to good use in the (hopefully near) future.

Apple's strategy is to keep releasing new iPods with new features.  Microsoft's strategy is still release new Zunes but also update existing Zunes for the future.  

"building our own products, but not our own factory" makes alot of sense.  Basically it sounds like your taking control over the assembly of Microsoft hardware (starting with Zune).  That way you can begin to apply your own quality controls over these things before they ship.  And I bet it will also lower your cost of doing more limited runs like the Halo 3 Zune.  Overall, I like it...and I bet the rest of the Entertainment & Devices division is eager to expand on it.

Wait so the existing factory will be making zunes... does this mean the existing zune or next-gen, or is that part a secret? On a side note, I have to say that before a 2nd gen zune comes out I'd like to see some more of the features that were either promised or would just be plain cool, i.e. zune as harddrive, improved wifi(I am actually more interested in connecting to a computer/360 wirelessly than say accessing marketplace via wifi but both would be WAY cool), games(why else have that 400MHz processor), oh and 1 that hasn't been mentioned connection options for a car that charges and plays from a single cord(I have 2 cords right now and it is mildly annoying), podcasting, and of course video downloads on zune marketplace(I'm in disbelief that this hasn't been put in yet). A Zune 2.0 would be really cool but isn't needed to make the zune superior to anything else out there, wheras these other features would push the zune WAY ahead of any other device on the market.

P.S. video sharing would be nice too.(DRM be damned!)

woot..just got the new "minutes to midnight" cd from linkin park..it owns

I think this quote from the MarketWatch article is key:

"...but the more important thing from our perspective is the flexibility and control we have in creating a device from scratch and making it down to the last component what we want it to be,"

i feel weird having to clear out Cesar comments, but what i understood is that, as in the Xbox factory, the factory has been build and i mantained by another company, the very same company who did the xbox factory flex something.

and MS simply directs the facotry and how everything is built..

Cesar, can you tell us if you're working on getting the Podcasting up? And we're definitely going to see the same (if compatible) updates for our Zune after the 2nd Gen comes out?

This is called Contract Manufacturing, they are doing this at Flextronics in Doumen China.  The idea is they supply a design of the product and key components that are to be bought from specific suppliers.

The 'factory' will supply the labor, warehouse, shipping, quality control and assurance, and manage the supply chain from the suppliers.  They will also bid out the other components that are not specifically deemed by Microsoft to the lowest supplier with the highest quality.

This is the same concept used by Microsoft in producing the Xbox and Xbox 360.  Many other companies use the same campus at Flextronics but not the same plant.  A lot of your cameras for your cellphones come from here.

Flextronics is extremely good in manufacturing processes and quality with PCB, plastic injection molding, and assembly.  This will allow the Microsoft design team to make the Zune with ample flexability and push overhead cost to the Contract Manufacturer.

No, I do not work for Microsoft (though got a resume in) and yes I have worked with Flextronics for a number of years.

@ Mark

They would most likely be building a new Zune at Flextronics.  the current Zune is more likely and acquisition product.  Meaning they are buying a patent design from a different company and having that company make a few tweaks and label it as a Zune.  Dell uses this same concept with their brand mark printers.

Other examples Kenmore Elite dishwashers, manufactured and designed by Bosch.  A lot of companies sell acquired products, generally though they can not manufacture this product themselves as they do not own the design.

Is the new Flex building going to be dedicated to MS products, or will it be shared like building 7 next door?