Jan. 19 (Bloomberg) -- Microsoft Corp., the world's largest software maker, as early as 2003 considered a partnership with Apple Inc. or creating its own digital music player to rival Apple's dominant iPod.

Microsoft, displeased with hardware partners Creative Technology Ltd. and Dell Inc. that made players using Microsoft's Windows Media software, talked about building its own device, according to an e-mail exchange between Windows chief Jim Allchin and media software executive Amir Majidimehr. The correspondence, introduced into evidence in a civil antitrust trial against Microsoft in Des Moines, Iowa, was made public today.

Allchin, who started the exchange in an e-mail entitled ``sucking on media players,'' also suggested he talk to Apple Chief Executive Officer Steve Jobs to get the iPod to work with Microsoft's media software for fear the iPod would ``drive people away from Windows Media Player.'' Microsoft introduced its Zune music player in November.

``My goodness it's terrible,'' Allchin wrote about one of Creative's devices. ``What I don't understand though is I was told the new Creative Labs device would be comparable to Apple. That is so not the case.''

Majidimehr replied ``Now you feel our pain.'' He said Microsoft was providing cash incentives to get the partners to improve devices. If that doesn't work ``it is time for us to roll up our sleeves and do our own hardware,'' he wrote.

Changed Course

Microsoft had been working with partners on music devices for at least a year before Apple introduced the iPod in 2001 and catapulted to a dominant position in the market. Microsoft and its partners failed to come up with compelling hardware and had difficulty getting software to properly connect music collections on computers with their devices.

In July 2006 Microsoft announced it would change course and sell its own device, software and music service under the brand Zune. A spokesman for Microsoft's digital media group didn't have an immediate comment.

Microsoft sold ``hundreds of thousands'' of Zune devices during Christmas, according to Entertainment and Devices Division President Robbie Bach. Apple sold 21.1 million iPods last quarter.

Microsoft is defending itself in a private antitrust class action in Iowa that began in December. In the trial, a statewide class of consumers claim Microsoft used its monopoly position in computer operating systems and software applications to overcharge for its software, including Windows, Word and Excel. The consumers claim $329 million in damages since 1994. That amount may be tripled under Iowa law.

Allchin

Earlier this week the trial judge gave permission for plaintiffs' lawyers to tell the U.S. Department of Justice that they believe Microsoft violated a 2002 court order in the U.S. government's antitrust suit against the company. The lawyers say Microsoft hasn't disclosed certain application programming interfaces as required.

The e-mails mark the second set of conversations exhibited in the trial in which Allchin, a 16-year Microsoft veteran, expresses concern about competition with Apple products. In a 2004 e-mail to Chairman Bill Gates and CEO Steve Ballmer made public during opening arguments in December, Allchin criticized Windows and said ``I would buy a Mac today if I was not working at Microsoft.''

Allchin at the time was leading development of Longhorn, the code name for Windows Vista, which reaches stores Jan. 30. Allchin, who is retiring after Vista is released, referred to Longhorn as ``a pig'' and said ``we have lost our way.''

Shares of Microsoft rose 11 cents to $31.11 at 4 p.m. New York time in Nasdaq Stock Market trading. They have risen 4.2 percent this month.

The case is Comes v. Microsoft Corp., CL 82311, Iowa District Court, Polk County.

To contact the reporter on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Bob Van Voris in New York at rvanvoris@bloomberg.net

Last Updated: January 19, 2007 19:40 EST