Microsoft announced that it would stop making new models of Zune music and video players due to lukewarm demand, and concentrate instead on incorporating Zune software into mobile phones and other Microsoft platforms, reports Bloomberg.

Although Microsoft will stop making new versions of the HD player, it will continue to sell current versions of the Zune, and other Zune Hardware and software, “We have nothing to announce about another Zune device — but most recently have introduced Zune HD to Canada via the Zune Originals store and remain committed to supporting our devices in North America,” the company said in an e-mailed statement, according to Eweek.

After this statement was revealed, many announced the death of the Zune, but Microsoft spokesman said that it was merely undergoing an evolution, “We’re absolutely committed to providing the best movies, music, and TV show experiences through Zune on the Xbox, the PC, Windows Phone 7 and Zune devices,” said the spokesman. “We’ll share more information about the evolution of the Zune entertainment service and Zune hardware as future plans develop,” he added, according to InformationWeek.

When Microsoft launched the Zune in 2006, CEO Steve Ballmer predicted that it would one day take over Apple, saying, “We can beat them, but it’s not going to be easy,” according to Bloomberg.

However, the Zune player has cost the company more than it raked in, according to some analysts, “This has been a vampire division since its inception. A vampire division is one that lives off the value created by the rest of the company and, from a corporate perspective, does more damage than good,” said Rob Enderle of the Enderle Group to Eweek in May 2010. “Its profit, which wasn’t much, was massively offset by the economic cost it caused to the corporation and it needed to be rethought.”

To save the Zune, Microsoft is looking to shift its focus to other, more profitable platforms, “We are thrilled by the consumer excitement for Zune across many new platforms, including Windows Phone 7 and Xbox 360. Our long-term strategy focuses on the strength of the entire Zune ecosystem across Microsoft platforms,” added the company, according to Bloomberg.