More owners of Toyota vehicles say recall repairs aren't working

More than 60 drivers have complained of sudden acceleration incidents despite the fact that their cars were repaired by Toyota Motor Corp. in the current recalls, new data released Thursday show.

The latest figure, released by the National Highway Traffic Safety Administration, significantly increases the total number of complaints involving repaired vehicles, which was less than 10 on Tuesday. The new complaints allege several accidents and at least three injuries resulting from runaway unintended acceleration despite the vehicles' undergoing a series of modifications at Toyota dealerships designed to resolve the issue.

In response to the rising number of complaints, federal regulators said they would contact each motorist to find out more about what happened. NHTSA also said it would ask Toyota for similar complaints it may have received from customers. The agency does not normally verify individual reports, posted anonymously on its database.

"If it appears that a remedy provided by Toyota is not addressing the problem it was intended to fix, NHTSA has the authority to order Toyota to provide a different solution," the agency said in a statement.

Toyota said that it had begun its own evaluation of the complaints, and that it was too soon to release findings. Toyota is "doing everything it can to ensure that our customers are confident in their vehicles," the company said in a statement.

The automaker has maintained that sudden unintended acceleration in its Toyota and Lexus vehicles is caused by sticking gas pedals or floor mats that can entrap the pedal, and has issued nearly 10 million recall notices for vehicles worldwide to correct the problem.

The new complaints, however, are fueling skepticism from those who think the root cause may lie in Toyota's electronics.

"These reports are extremely troubling and reinforce the serious questions raised in congressional hearings about the true cause of sudden unintended acceleration in Toyota vehicles," Rep. Bruce Braley (D-Iowa), vice chairman of the House Energy and Commerce investigations subcommittee, said in letter Wednesday to the Department of Transportation and NHTSA.

If the allegations are true, he added, it could indicate "that Toyota electronics may be playing a role."

In its statement, Toyota said that the complaint evaluations it has already completed "have found no evidence of a failure of the vehicle electronic throttle control system, the recent recall remedies or the brake override feature."

One complaint involves a 2009 Matrix that was repaired Feb. 13 in Cleveland Heights, Ohio. Eleven days later, it spun out of control and hit a concrete median at 55 mph, according to the filing, which alleges an unspecified injury.

The owner of a 2007 Camry wrote to NHTSA saying that even after the recall repairs were made Feb. 27 at a dealership in Greensboro, N.C., the vehicle "experienced a sudden surge in acceleration twice."

The driver described racing from a standing start and also an event that occurred at highway speeds. The complaint suggests the problem is in the car's computer system.

The recalls, which affect a broad variety of Toyota and Lexus vehicles, also include the Pontiac Vibe, which was built in a joint venture between General Motors Co. and Toyota at a California plant until last summer.

One driver from Missouri complained to NHTSA of a 2009 Vibe that raced to 7,000 rpm uncommanded, causing it to lurch forward.

The owner took it to the dealership Feb. 19, where its accelerator was modified and driver's-side floor mat removed. Three days later, the complaint alleged, "the car malfunctioned again, causing a near collision."

Under its two continuing recalls, which affect about 6 million cars in the U.S., Toyota is replacing or modifying pedals, changing out floor mats, removing carpet padding and installing software designed to allow the brake to electronically override the throttle.

Earlier this week, Toyota said it had already repaired more than 1 million vehicles under the recall campaigns.

NHTSA said this week that it had received at least 52 reports of fatalities linked to sudden unintended acceleration in Toyota and Lexus vehicles.

Ford Beating GM May Be ‘New Normal’ on Vehicle Lineup, Quality

Ford Motor Co. beating General Motors Co. in U.S. sales in February may signal a new automaker atop the industry as Chief Executive Officer Alan Mulally pares operating costs and refreshes the vehicle lineup.
Monthly results released yesterday showed Ford topping GM in deliveries for the first time since 1998. Before that, the Dearborn, Michigan-based company’s last win was in 1970, based on Ford data. Both triumphs came when strikes idled Detroit- based GM, which has been No. 1 in U.S. annual sales since 1931.
“Ford’s advantage over GM could be the new normal,” said Shelly Lombard, a debt analyst for more than two decades who is now at Gimme Credit LLC in New York. “GM is still in turnaround mode and Ford is six steps ahead. Ford has the products, a new reputation for solid quality and management focus.”
Mulally, who joined Ford more than three years ago from Boeing Co., has championed redesigned sedans such as the Taurus, presided over a 47 percent cut in the North American workforce since 2006 and, unlike GM, avoided bankruptcy. The Ford brand rose to eighth place in 2009 from 23rd in 2001 in the initial quality survey by consumer researcher J.D. Power & Associates.
GM exited court protection last year with a plan to drop half its U.S. brands. The winding down of those units damped February results, and CEO Ed Whitacre reshuffled the sales team for the second time since December.
February Results
Ford reported a 43 percent increase in sales to 142,285 in February, topping the 33 percent average estimate among 5 analysts surveyed by Bloomberg. GM reported sales of 141,951 units, a 12 percent gain that trailed the analysts’ projection of a 20 percent increase.
“It could be a turning point,” said John Wolkonowicz, an analyst with IHS Global Insight in Lexington, Massachusetts.
Ford’s U.S. market share was 18.2 percent, compared with 18.1 percent for GM, according to researcher Autodata Corp. in Woodcliff Lake, New Jersey.
“We’re not measuring ourselves against any other company,” George Pipas, Ford’s sales analyst, said in an interview. “We’re measuring ourselves against the consumer.”
Jason Laird, a GM spokesman, said: “None of our internal benchmarks are against another company. And one game does not a season make.”
Toyota Motor Corp., which has been second in annual U.S. sales since 2007, said deliveries fell 8.7 percent to 100,027 after its global recalls. The drop at the world’s largest automaker was less than the 10 percent predicted by Santa Monica, California-based research firm Edmunds.com.
‘Nice Trajectory’
“The No. 1 spot is up for grabs now more than it has ever been,” said Jesse Toprak, vice president of Santa Monica-based researcher TrueCar.com. “Ford clearly is going through a major recovery and has a very nice trajectory for sales growth. But GM and Toyota both clearly have a shot.”
GM’s February results showed the effect of the planned sale or shutdown of Saab, Hummer, Saturn and Pontiac as part of last year’s government-backed bankruptcy. Those four vehicle lines plunged 86 percent to 3,102, GM said.
Deliveries for the remaining brands, Chevrolet, Cadillac, Buick and GMC, rose 32 percent from a year earlier, GM said. Volumes more than doubled for the Buick LaCrosse sedan and Chevrolet Equinox SUV.
“We have not moved far enough, fast enough,” GM North American President Mark Reuss said on a conference call in announcing the creation of separate arms for sales and marketing in the region.
GM’s Changes
Susan Docherty, vice president for sales, service and marketing, was shifted to handle only marketing. Steve Carlisle, most recently executive director of Southeast Asia operations, became vice president of U.S. sales operations, GM said.
Docherty was given her previous duties on Dec. 4, three days after Whitacre, 68, added the CEO title to his job as chairman when the board ousted Fritz Henderson. Docherty and Carlisle will report to Reuss, who was appointed in December.
Whitacre has said he wants to defend GM’s market share as he tries to halt about $88 billion in losses from the end of 2004 through last year’s first quarter. He has said he hopes for a profit this year. Mulally, 64, steered Ford to net income of $2.7 billion in 2009.
The U.S. industry is still recovering from last year’s plunge to the lowest sales levels since 1982.
Sales Rate
February sales ran at a seasonally adjusted annual rate of 10.4 million, according to Autodata. Snowstorms curbed showroom traffic across much of the U.S. last month. Manufacturers, dealers and investors use the sales pace to compare monthly totals by taking into account seasonal buying patterns. Annual U.S. sales averaged 16.8 million last decade through 2007.
Ford fell 19 cents, or 1.5 percent, to $12.22 yesterday in New York Stock Exchange composite trading. The shares have climbed 22 percent this year.
Ford last outsold GM on an annual and quarterly basis in 1930, when founder Henry Ford and his son, Edsel, were running the company, according to Ward’s Automotive Reports.
Toprak, the TrueCar.com analyst, said Ford, GM and Toyota would jockey for the top spot in the U.S. throughout 2010.
“These three will be very close to each other for the remainder of the year,” Toprak said. “It will be a head-to- head-to-head competition for the foreseeable future.”
--With assistance from Bill Koenig in New York and David Welch in Southfield, Michigan. Editors: Ed Dufner, Jamie Butters
-0- Mar/03/2010 05:01 GMT
To contact the reporters on this story: Keith Naughton in Southfield, Michigan, at Knaughton3@bloomberg.net; Mike Ramsey in Southfield, Michigan, at mramsey6@bloomberg.net
To contact the editor responsible for this story: Jamie Butters at jbutters@bloomberg.net
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Obama cites GOP ideas as he preps health care plan

President Barack Obama embraced a handful of Republican health care ideas Tuesday to lure votes of Democrats wary of a more partisan approach as he prepared to spell out his final package for a sharply divided House and Senate, where its fate is unsure.
In a bit of political sleight of hand, Obama said he might include four GOP-sponsored ideas in his plan, even though virtually no one in Congress or the White House thinks it will procure a single Republican vote.

The move is aimed instead at wavering Democrats, especially in the House. Some of them might find it easier to vote for the health care package if they can tell constituents it had bipartisan elements that Republicans should have supported. Yet there is no guarantee that Democratic leaders will incorporate Obama's suggestions in revised legislation.
Senate Republican leader Mitch McConnell warned that Democrats will enact their health care plan at their own political peril, vowing to make it an issue in every congressional race this fall.

In remarks at the White House on Wednesday, the president will describe the final elements of his proposal and then ask Congress to enact it, aides said. Obama was expected to reiterate why changing the system is so important and again explain what his plans would mean to families and businesses. The aides also expected Obama to talk about the Republican ideas he wants woven into the Democrats' plans.
He is expected to leave no doubt that, barring an unexpected change in Republican tactics, he wants Congress to pass the legislation using budget reconciliation rules, which prohibit Senate filibusters. Obama is unlikely to use those exact words, as Democratic leaders are emphasizing they want to pass a bill with simple majority votes in the House and Senate.
"He'll urge Congress to move swiftly toward votes on this legislation," said a White House official who described Obama's remarks on condition of anonymity to avoid upstaging the president.

It takes 60 votes to halt a filibuster, and Democrats can count on only 59 in the 100-member Senate.
In a letter to congressional leaders Tuesday, Obama said he would consider four ideas floated by Republican lawmakers: sending investigators disguised as patients to uncover fraud and waste in Medicare and Medicaid; expanding pilot programs to bring more predictability to medical malpractice lawsuits; increasing payments to Medicaid providers; and expanding the use of health savings accounts.
"I said throughout this process that I'd continue to draw on the best ideas from both parties, and I'm open to these proposals in that spirit," Obama wrote.
In a nod to his 2008 presidential rival, he said he had eliminated a special deal for Medicare Advantage beneficiaries in Florida and other states that drew criticism from Sen. John McCain, R-Ariz.
But Obama again rejected Republican appeals to restart the health care debate or dramatically scale back his proposals.
"Piecemeal reform is not the best way to effectively reduce premiums, end the exclusion of people with pre-existing conditions or offer Americans the security of knowing that they will never lose coverage," his letter said.
House Speaker Nancy Pelosi said the letter "brings us just another step closer to passing the bill." She said she hopes to incorporate some of the GOP ideas.
Republicans, meanwhile, made it clear the president's overtures will not win their hearts or votes.

Sen. Tom Coburn, an Oklahoma Republican who proposed some of the notions Obama is weighing, said that "merely incorporating these ideas into the deeply flawed House and Senate bills will not bring us any closer to real reform."
In a letter to Obama, Coburn noted that opinion polls show extensive opposition to the Democratic plan. "An all-or-nothing reconciliation strategy will give the American people nothing," Coburn wrote.
White House chief of staff Rahm Emanuel, after meeting with top Democrats in the Capitol, told reporters: "Reconciliation is a vehicle that's been used many times. This is a normal procedure."
The Democratic package would extend health coverage to 30 million uninsured Americans over 10 years, with a first-time mandate for nearly everyone to buy insurance. It would provide subsidies to help low-income people buy insurance, and it would impose several new requirements on insurers and employers.

It will be less expensive than the health care bill the House narrowly passed in November, and will contain no government-run insurance program to compete with private insurers.
Those changes might appeal to some of the three dozen Democratic House moderates who opposed the November version of the bill. The revised bill may die if none of those Democrats vote for it, because some Democrats appear likely to switch from yes to no because of a dispute over abortion funding restrictions.
Obama signaled a willingness to take a small step farther into the contentious issue of limiting lawsuits that allege medical malpractice. Plaintiffs' lawyers, a key fundraising source for Democrats, staunchly oppose such limits. But Republicans and many doctors have demanded them for years.
Obama's letter said he was open to appropriating an extra $50 million for pilot programs that experiment with specialized health courts rather than jury trials. A judge steeped in medical matters would hear evidence and render verdicts for patients alleging injuries from wrongful acts.
A plaintiff lawyers' group, the Center for Justice & Democracy, said it strongly opposes such health courts, calling them "anti-patient."
It was unclear Tuesday when the House and Senate might vote on the revised health care proposals. Some Democrats hope to do so before Obama leaves for a trip to Asia on March 20.

Data from a Democratic pollster has been circulating on Capitol Hill showing that opposition to the health care plan drops substantially when people learn more details about how it might help them. This is especially true of independent voters, who fear the plan involves too much government intervention until they learn more about it, the poll states.

Team Sea Dubai takes a serious option on the Al Maktoum Sailing Trophy RC 44 match race

Only two flights could be completed today due to the lack of wind. Two teams conclude the day undefeated: Markus Wieser’s Team Sea Dubai - who hasn’t lost a single match in this event - and Paul Cayard’s Katusha, who recovers well after a bad day yesterday.February 23, 2010 – The wind was very light and fluky today for the second half of the match race event. Despite Peter "Luigi" Reggio’s attempts to close the contest, the last two flights will take place tomorrow, before the fleet race practice.Unbeaten after seven flights, Team Sea Dubai is almost certain to win the title. Indeed, the local team’s closest rival, Artemis, sits two points behind whilst the team from the Emirates won the direct confrontation this afternoon. All they have to do is cross the line and avoid any penalising collision.The match of the day, between Team Sea Dubai and Terry Hutchinson’s Artemis, delivered all its promises. The two boats started on split tacks at full speed and immediately engaged in a tacking dual. Just ahead of its opponent after the first cross, Hutchinson made a slight error of appreciation that allowed Team Sea Dubai to close the gap. The two teams then engaged in a dial up as they were nearing the windward mark. Markus Wieser came out of it better than Artemis and rounded the mark two boat lengths ahead. Hutchinson tried hard to come back during the rest of the race, but Wieser and his crewmembers held on tight and won the race."We focused on the basics", commented Hartwell Jordan, Team Sea Dubai’s mainsail trimmer and strategist. "Last night, we debriefed our first day and decided not to change anything and to carry on sailing for fun, without putting any unnecessary pressure on our shoulders. We felt comfortable with our course management and boat speed, so we didn’t feel the need to put a specific strategy in place. We just went for it as relaxed and focused as we could."Disappointed by his results today (two losses against TSD and No Way Back), Terry Hutchinson remained as positive as he could. "The day was good", he said. "We won our two starts and managed to keep the pressure all along. Unfortunately, we did some mistakes. In the first race, we went to the wrong side of the course and our timing was slightly wrong in the second one. I have the feeling that we bet ourselves more than anything else."Whilst Team Sea Dubai is almost certain to win the title, the rest of the podium remains open. Artemis is currently second with four points, followed by five teams on a tie in third with three points.Despite the winner being almost certainly known, the last two flights will definitely not be for the gallery!They said:Hartwell Jordan, mainsail trimmer and strategist, Team Sea Dubai: “We have changed the set up of our boat over the winter and we can feel the difference. We have also changed our mental approach: in the past, we sometimes felt intimidated by the level of our competitors. We are now more relaxed about this, and we try to manage the pressure more efficiently. We’ve also trained hard over the winter, which has allowed us to remember all the moves almost instinctively. As a consequence, we can now look out of the boat and concentrate on the regattas."Cameron Appleton, helmsman, Team Aqua: “This hasn’t been the most rewarding event for us so far and we’ve had a tough couple of days… We didn’t train like the others over the winter, but I don’t think it would have made a difference in this light wind. Our problem was mainly linked with timing; we didn’t take good starts and weren’t in the right rhythm."Rod Davis, helmsman, Ceeref: “It was good to win a race by one second against Team Aqua after having lost two matches by one second yesterday… It’s very strange, we are loosing against teams that we should beat (on the paper) and we are winning the toughest matches. It shows how tight the Class is. Any small team can challenge the best ones. The consequence is that we need to train harder in order to improve."Paul Cayard, helmsman, Katusha: “We were quite unhappy with our result yesterday, but the good thing is that the team stayed well together, and focused. We all knew that we could do a better job. We spoke about our races and decided to keep it as simple as possible and focus on getting a better result without changing anything fundamental in the way we sail. It’s just tough; the races are very close and difficult."Match-race, provisional results after seven flights:(Ranking, name of team, helmsman, No of victories / defeats, points)1) Team Sea Dubai (Markus Wieser), 6/0, 6 points2) Artemis (Terry Hutchinson), 4/2, 4 points3) CEEREF (Rod Davis), 3/3, 3 points3) BMW ORACLE Racing (Adam Minoprio), 3/3, 3 points3) Team Islas Canarias Puerto Calero (José Maria Ponce), 3/3, 3 points3) Team No Way Back (Pieter Heerema / Ray Davies), 3/3, 3 points3) Katusha (Paul Cayard), 3/3, 3 points8) Team Aqua (Cameron Appleton), 2/4, 2 points9) Team Austria (Christian Binder), 1/6, 1 point

As Economy Stumbles, Local "Currencies" Gain Traction

When Judith Lasker joined the Community Exchange program, a local currency organization in Lehigh Valley, Pa., she knew she was helping fellow members of her community. She just didn't realize how much.

Driving an older member of the Community Exchange to a physical therapy appointment one morning, Lasker was touched by her passenger's story of how the exchange had changed her life.
"She said simply that she would have been forced to give up her home if not for the program," Lasker said.
Community Exchange is just one example of local, hours-based "currencies" that are growing in popularity nationwide. Today, there are close to 100 types of local currencies operating in the United States.
While some currencies are true to their name and are backed by federal dollars, others are simply a record of hours worked by contributing “time bank” members. “Whenever you have a shortage of money, people look to invent their own medium of exchange,” said David Boyle, fellow of the New Economics Foundation and Author of "Money Matters."
The earliest local payment system on record began in the1930’s, which isn't surprising; historically, local currencies have been most popular during times of economic crisis, and the U.S. then was in the midst of the Great Depression.

Today, the Community Exchange hours system has 450 members, though similar systems work with just 50 or more members. When one member does something for another, they get credit for the amount of time spent helpng. Each member’s time is worth the same, whether they’re giving tax advice or cooking dinner.
Because there is no set standard for what a local currency should be, many times the grassroots effort to start a program doesn’t gain the momentum it needs. The average success rate for local currency is around 20%, according to a study done by Professor Ed Collom at the University of Southern Maine, which looked at 82 such currencies.
“It’s difficult to keep going, because of the scale on which they are organized,” said Boyle. “You’ve got local people organizing it, and inevitably the workload gets out of hand.” Boyle sid that in order for a local currency to thrive it must be imbedded with another type of endeavor, like a local business or the local government.

The Community Exchange is joined with the Lehigh Valley Hospital, which offers the organization a headquarters for its members database and a place to work, free of charge. Although this offers stability for the Exchange, there is still a danger of members not treating it as a formal system, Collom said. There’s always the risk of it turning into a network of “friendly favors.”
“Once you make friends, it’s like, 'Oh, don’t worry, I don’t need that hour and a half,' he said. “It’s sort of a catch-22, because once the program is successful, the relationships are formed and the program doesn’t need to exist anymore. But until the program gets off the ground, those connections can’t be made.”

Of course, even local currencies with tangible bills aren’t foolproof.
“Counterfeiting is always a possibility,” said Susan Witt, executive director of the E.F. Schumacher Foundation and co-founder of BerkShares, the local currency in the Berkshire region of Massachusetts.
Counterfeiting has never happened before, thanks to security features on the bills, and the relatively small size of the circulation area, Witt said.
“If someone showed up with several fake 50s, it wouldn’t take long to figure out who they were,” Witt said.
Since 2006, BerkShares have been traded through 13 branches of 5 local banks. The exchange rate is 95 cents to every dollar. Accepted at just under 1,000 retailers in the region, $2.5 million of BerkShares have been issued from the bank, and $140,000 are currently in circulation.
Convincing local retailers to use the BerkShare hasn’t been tough, Witt said. Although there is a 5% discount to customers, it’s seen as a way to encourage citizens to shop locally. It also means merchants aren’t paying for processing of credit card fees, bounced checks, or waiting to collect on bills.

For merchants that accept BerkShares, there’s the possibility of having too great of a ratio of Berkshares to dollars. Should a merchant find they have too many to do business properly, they can go to a local bank and trade in their BerkShares for federal dollars.
With BerkShares, as with all local currencies, there are no coins allowed. Although local currencies are legal as long as there is an exchange rate with federal dollars so transactions can be recorded for tax purposes, coins are not allowed because they involve processing precious metals.
The main stumbling blocks for local currencies are maintenance and staff, Collom said. For BerkShares, grants to pay for printing of the currency and bank account setup was provided by a donor-directed fund at the Rudolph Steiner foundation in California.
The interest in local currencies will persist, even as the economy improves, Collom said, because local forms of payment tie into the “buy local” movement that has gained so much traction in recent years. “It all goes back to the idea of neighbors helping neighbors,” Collum said. “Whether they’re changing a lightbulb or helping their local florist stay in business, it's currency that can work.”
With the broader economy stil trying to find its feet, local currencies will continue to grow and flourish, according to Boyle.

“Typically, these things tend to happen in births of innovation and then its quiet again, and I think we are at the beginning of a birth at the moment,” he said.

The Internet is the most important things in the world

Most of the respondents also said the Internet would improve reading and writing by 2020, according to the study, conducted by the Imagining the Internet Center at Elon University in North Carolina and the Pew Internet and American Life project.

"Three out of four experts said our use of the Internet enhances and augments human intelligence, and two-thirds said use of the Internet has improved reading, writing and the rendering of knowledge," said study co-author Janna Anderson, director of the Imagining the Internet Center.

But 21 percent said the Internet would have the opposite effect and could even lower the IQs of some who use it a lot.

"There are still many people ... who are critics of the impact of Google, Wikipedia and other online tools," she said.

The Web-based survey gathered opinions from scientists, business leaders, consultants, writers and technology developers, along with Internet users screened by the authors. Of the 895 people surveyed, 371 were considered "experts."

It was prompted in part by an August 2008 cover story in the Atlantic Monthly by technology writer Nicholas Carr headlined: "Is Google Making Us Stupid?"

Carr suggested in the article that heavy use of the Web was chipping away at users' capacity for concentration and deep thinking. Carr, who participated in the survey, told the authors he still agreed with the piece.

"What the 'Net does is shift the emphasis of our intelligence away from what might be called a meditative or contemplative intelligence and more toward what might be called a utilitarian intelligence," Carr said in a release accompanying the study. "The price of zipping among lots of bits of information is a loss of depth in our thinking."

But Craigslist founder Craig Newmark said, "People are already using Google as an adjunct to their own memory.

"For example, I have a hunch about something, need facts to support and Google comes through for me," he said in the release.

The survey also found that 42 percent of experts believed that anonymous online activity would be "sharply curtailed" by 2020, thanks to tighter security and identification systems, while 55 percent thought it would still be relatively easy to browse the Internet anonymously in 10 years

Microsoft phone system hits reset on digital music

To date, Microsoft's effort to address the digital music market has largely focused on its Zune player and Zune Pass subscription service, which have won favorable reviews but few customers. But with the recent unveiling of its Windows Phone 7 Series operating system at the Mobile World Congress conference in Barcelona, Microsoft hopes to reboot its struggling digital music strategy.

Even the well-received Zune HD device, introduced last fall, hasn't been enough to convince music fans to convert to the Zune Pass. The company says it has sold only 3.8 million players since 2006, and NPD Group estimated in November that it has a 2 percent share of the U.S. portable media player market, compared with 70 percent for Apple's iPod.

So Microsoft has made it a priority to expand the Zune service to other platforms. In November, it added the Zune's video service to its Xbox Live network, consisting of more than 20 million worldwide users of the Xbox 360 gaming console. Since then, Zune communications director Jose Pinero says the number of daily HD video downloads and streams has doubled. Now, Microsoft plans to use its Windows Phone 7 platform to bring Zune to mobile customers.

"Anybody who gets a Windows Phone 7 Series phone is going to get a Zune within that device," Pinero says.

INTERNATIONAL PUSH

The most immediate impact this has is to expand the Zune service to countries outside of the United States and Canada, which are the only markets where the Zune is sold. While Microsoft will continue to sell the original Zune player in the States, Pinero says it doesn't plan to expand it to other countries, instead relying on the mobile phone software to bring the Zune service to those markets.

For this strategy to work, Microsoft will have to turn around its equally struggling mobile phone business. According to technology research and consulting firm Gartner, Windows Mobile handsets rank fourth in worldwide smart-phone sales, at 7.9 percent, as of third-quarter 2009, down from 11 percent a year earlier and behind Nokia, BlackBerry parent Research in Motion and Apple.

But those rankings remain fluid, as analysts expect global smart-phone sales to double in the next three years.

"There's certainly opportunity for Microsoft and other players in this market to grab share in the smart-phone space," says Sue Kevorkian, an analyst at tech market research firm

IDC.

Early reviews of Windows Phone 7 have been positive, with its simple interface and clean design winning high marks. But handsets featuring the new technology aren't expected to hit the market until the 2010 holiday season. By that time, Apple is expected to release an updated iPhone.

Zune will need to do more than piggyback on an innovative new mobile phone platform to generate the kind of momentum needed to elevate itself from the status of also-ran. It must compete with rival mobile music services sure to be created for handsets using Windows Phone 7, and the company hasn't yet detailed how developers will be able to integrate Zune functionality into their applications, if at all. Answers to those questions are expected in March at Microsoft's annual Web developer conference, Mix.

Zune will also need to increase its footprint to encompass more than mobile technology. That includes adding the music service to the Xbox Live network, as well as taking a larger stake of the subscription market and expanding that lackluster model beyond its current state.

Forrester Research analyst Sonal Gandhi estimates the entire U.S. music subscription market totals just 2.5 million users, and that includes not only Zune, Rhapsody, Napster and MOG, but also eMusic and those paying for the premium tiers of such streaming services as Pandora and Live365.

While Microsoft's recent moves may lend an important boost to Zune, the company will have to look beyond the subscription model if it is to have much of an impact on overall digital music revenue.