Baller said that they're "going to keep going with Zune" but "I won't say full steam ahead, because that implies acceleration of investment, but we're going to sustain our investment." He divides the Zune into two things, a service and a device, with the service spreading out in different directions. Peter Kafka paraphrases Ballmer: "We like it and the future may be the software/ecosystem on other devices."
If Microsoft's not planning on pouring more money into Zune than already is, it means they've given up on trying to take more of the iPod's media player marketshare. At least that's how I read a standstill on development investment. Instead we'll see the Zune software spread to other devices, probably Windows Mobile phones—maybe with Windows Mobile 7—which is something we've been hearing about for a while. If the Zune software goes on, but the hardware doesn't, is Zune dead or alive? [WSJ via Zune Boards, Thanks Dave!]