Yes and no. But mainly no.

As I said when the Zune was first released, Microsoft usually releases stuff which sucks horribly at first (probably because they make stuff for the wrong reason, i.e. to copy a competitor so they can steal its market share), but slowly, over time, they improve the product bit by bit until eventually, it doesn’t suck so much.

This strategy worked very well with software because MS had the ultimate cudgel of the Windows OS, and the power to load it only with MS software. That’s why most people use Internet Explorer, despite the fact that it is the suckiest browser imaginable. In the past, when they released new products, they were almost always terrible out of the gate–but eventually they improved it just enough so that when MS made their software the default on their OS, people would suffer with it.

The Zune has no such advantage; MS can’t put anything on their desktop that would more or less force people to buy the Zune. In order for it to succeed, MS has to make the Zune good enough on its own. But there’s a problem with that: generally speaking, Microsoft’s talent has been to rip off ideas that other people come up with. While that has its advantages, there is one pretty major disadvantage: you can’t get ahead of someone you are intentionally trailing.

The new Zune HD is a lot better than the 2nd generation Zunes, which were lots better than the original Zunes. And if you compare the Zune HD with the current iPod Classic, the Zune wins. The problem with that is that the iPod Classic is a model which is several years old; Apple only keeps it around for people who want a high-capacity HDD to store tons of stuff. Apple’s real focus is on the iPod Nano, iPod Touch, and the iPhone.

Since all models of Zune except for the HD are being discontinued, there is no equivalent for the Nano, and since the Zune is not a phone, there is no competitor for the iPhone. The Zune seems pretty squarely aimed at the popular iPod Touch. While the iPod touch is available in 32 and 64 GB capacities, the Zune HD is available is 16 and 32 GB models; let’s compare the 32’s:

As you can see, it’s not really incredibly close. The Zune only exceeds in being smaller and it has an FM radio; otherwise, the subscription service is pretty much all that is attractive about it, and that only to some people. The Touch, meanwhile, has a bigger and higher-resolution screen (the Zune’s OLED is better indoors but crappy in sunlight), has Bluetooth (wireless headphones), is compatible with Mac and PC, and is sold internationally with a wide variety of languages.

But the big plus for the Touch is the App Store. OK, whittle away the apps made only for the iPhone, and all the fart apps and other programs which are stupid, and you’ve only got, what… several thousand good apps. The Zune has a browser and maybe a few other apps, with maybe a few dozen more promised by the end of the year… but don’t expect the avalanche of apps that Apple’s App Store has seen.

And the App Store is key: apps add functionality. The Zune has no maps application, no games (ironically, Apple’s product is where the gaming community lives now), no Twitter or Facebook, not even a stopwatch app–nor anything else except a browser. And the browser is some five to ten times slower than Safari on Apple’s handsets.

In short, the Zune is a great competitor… for what Apple had a few years ago. Zune just got stuff which Apple came out with in 2007, like the touch screen, or in 2008, like the App Store (of course, Zune doesn’t have an app store quite yet–though it is reported that they are offering truckloads of money to developers to port their apps to the Zune).

But the key point is that the Zune still lags behind; they are simply not catching up, at all. Yes, the Zune today is cooler, better-designed (remember the original crap-colored Zune?), and generally a much superior product. But it’s still way behind.

And it’s only in North America, only in a few languages, and still only for Windows. They actually cut out the lower-end “mini” models for some reason, not even keeping a “Classic” Zune.

Meanwhile, Apple still has a whole product line to sell: iPod Shuffle (3 capacities, 5 colors), iPod Classic, iPod Nano (2 capacities, 9 colors), iPod Touch (3 capacities), and the iPhone (3 capacities, two colors). And Apple’s high-end product, the iPhone, is available for cheap if you were going to pay for a cell phone plan anyway, and includes the camera (stills and movies), GPS, compass, voice recording, etc.

If Microsoft could somehow tie the Zune to the Windows Desktop, Apple would be in trouble. But they can’t. And when MS can’t force a product through their near-monopoly, we observe the actual talent of the company to innovate: in short, zilch.

Update: Microsoft is adding 9 apps, including a calculator, weather, and 7 basic game apps. All of the game apps reportedly play ads up to 15 seconds long before the app even begins to load. Zune fans are not pleased, and I can understand why. I’m annoyed by static ads on iPhone apps which display for a second before I can dismiss them. But a 15-second video ad that plays every time I open the app? Yech.