Is Apple scared of Zune? According to this article Apple has plenty of reasons to worry. What seems most innovative about the Zune device is its ability to support p2p WiFi as pointed out by Mike Elgan, this is the equivalent of MySpace in a handheld device.

The technology in the Zune is not revolutionary and one wonders why Apple didn’t come out with a p2p WiFi device. The answer in my opinion is the company’s obsession with form factor. Having a WiFi device would not be as aesthetically pleasing as it would have to be larger to support a bigger battery.

So if kids start to obsess over the p2p WiFi in Zune and the superior screen for watching movies, Apple will have a whole lot of trouble on its hands. The iPod is central to Apple’s strategy and the tiny white killer-device needs to stay a category killer for the rest of Apple’s plans to play out optimally.

Still, we can't count Apple out. They have a way of delighting consumers like no other tech company I am aware of. The question is what is the next area for the company to innovate in. They are now officially behind Microsoft in music player technology. They need to catch up quickly and even surpass Redmond’s creation before it turns them into sauce.