I'll assume you meant 'threat'.
The Zune is a decent player that has attracted *mixed* reviews, and *minimal* interest from PC tech heads. Remember, this is the DAP that was out-sold by a record player less than a month after it was launched.
No argument with the 'MS will throw money at a problem' point, it's what they're best at. Unfortunately, they throw money at a problem, and consistently end up with mediocre solutions. It's just the way they are.
Where have they showed they can develop hardware in a very short space of time (given that cost isn't really a factor for MS)? The XBox? Essentially a PC. The 360? Not developped in 'a short space of time'. The Zune? A different face-plate on a pre-existing Toshiba MP3 player that didn't sell well the first time around.
For the most part, the *US* doesn't have 3G yet. Where it does it's extremely expensive, and the phones that support it are battery hogs (less than 2 hours use of 3G functionality on a phone that otherwise gives 30 hours of talk-time).
Only 4-8GB of storage. Only? Most smartphones come with 128MB or less! Sure, they've got an SD (or mini-SD, or micro-SD) slot, but the phone doesn't have 4-8GB of storage.
Very expensive. Compared to what? Seriously, compared to what? You're not going to find a smart-phone on the market that has the same features as the iPhone for less. Period. End of story. Even if you ignore the mulit-touch nature of the screen, and the built-in storage capacity the iPhone is the least expensive phone in its feature-set neighborhood. The phones that come close in features & price come with 128-256MB of storage, and you'll spend another $80 getting a 4GB mini-SD card for them if you can even find one (god forbid you want an 8GB card).
A Zune phone without all the amazing iPhone features would be yet another Windows Mobile smart-phone, which combined have managed to capture 4.5% of the smart-phone market which represents a piddly 5% of the cell-phone market. Give it a 20-30GB drive, and you're looking at something even larger than the 30GB Zune (which is slightly larger than the 80GB iPod). Remember, a device doesn't get *smaller* when you start adding radios and antennas. If the Zune phone has 20-30GB of flash, it's *not* going to be less expensive than the iPhone.
The experience that finally brought us an acceptably usable PDA interface with winCE 5 (Windows Mobile 5)?
I've discovered over the past 10 years as a software developer (using mostly Microsoft products) that it's actually quite *difficult* to underestimate Microsoft. For example, when they first announced the intended ship-date of Longhorn (well before they announced the Vista name), I had it pegged as being released in early- to mid-2006. When did it ship? Late 2006 for enterprise customers, and early 2007 for consumers.
If capacity and price are the biggest problems you have with the iPhone, I can only assume you have the same problem with every other smart phone on the market. None have anywhere *near* the capacity of the iPhone, and nothing with anything close to the feature-set of the iPhone is noticably cheaper.
There's only one way Microsoft is going to beat the feature-set of the iPhone *and* beat the price. Unfortunately, that way is an illegal activity for a monopoly referred to as 'dumping', where the monopoly enters a market selling their goods below cost in order to drive out the competition. To top it off, if MS *did* try dumping, they'd have more than just Apple filing anti-trust complaints. They'd have the entire smart-phone market *including* their Windows Mobile smart-phone partners.
