Zune Doomed?

OK, better sit down for this one.  A big surprise here:  Microsoft may be ready to kill the Zune.  We know: shocker!

According to the FT via SAI :

In digital music… Mr Ballmer seemed all but ready to throw in the towel on the Zune mobile device, which has failed to gain ground on Apple’s iPod. But he suggested that the focus of competition in digital media was moving onto ground that Microsoft understands well: software.

He said that, with the market for dedicated portable media players in decline, the future lay in more “general purpose” devices – such as Apple’s iPhone and touch.

So will Microsoft kill the Zune and focus on it’s Danger and Windows Mobile devices?  Sounds like a good long term strategy, even Apple is seeing flattening sales of iPods and most of the innovation is in the Touch/ iPhone area. 

Any other opinions out there?