Microsoft has revamped its line of Zune digital music players in an effort to compete with Apple’s all-conquering iPod.

The three new Zune devices are smaller than their predecessors, have improved screens for watching video content and include a new wi-fi feature that allows them to link up wirelessly to a personal computer to download tracks.

The gadgets, scheduled for release in the US next month, will come in 4-gigabyte, 8-gigabyte and 80-gigabyte models.

Microsoft also aims to tap the craze for social networking sites, such as FaceBook, through Zune Social, a new internet destination where Zune users can share music playlists and find music lovers with similar tastes.

The revamp follows Apple’s upgrade to its iPod range last month, the highlight of which was the iPod touch, a sleek touch-controlled gadget that can surf the internet, play music and show films in wide-screen.

Apple has also garnered a huge amount of media coverage in recent months over its launch of the iPhone, its first foray into telecoms.

The original Zune was released last year to lukewarm reviews, but Microsoft is betting that the line will play a large part in its future.

This week Steve Ballmer, the Microsoft chief executive, told Times Online that the software giant would renew its focus on the market for digital devices, such as music players and TV systems, as it works to stir up its lacklustre share price.

However, he disputed the suggestion that Microsoft was seeking to ape Apple.

“You might say that Apple is trying to muscle in on the rest of us in mobile devices,” he said. “We sold more than 12 million Windows-based mobile phones last year. Apple is just joining the market.”

He added: “Apple has done some nice work. This is not a shot at Apple. But Apple is newer to the mobile device game. We have been at it for four or five years and with some success.”

However, Microsoft has its work cut out in competing with the iPod. The software giant has sold about 1.2 million Zunes since last year — a figure eclipsed by the 41 million iPods sold by Apple between last October and June.

Since its introduction five years ago, more than 110 million iPods have been sold. In the process Apple has transformed itself from a niche maker of stylish computers into a music powerhouse.

It has sold more than three billion tracks on iTunes, its online store, and is now able to exert influence over record labels and the public's buying habits.

The new Zune line includes Microsoft's first products to use “flash” memory — the storage technology already used in Apple's iPod nano, the most successful digital music player to date.

Microsoft said that it expected flash versions of the Zune with 4 and 8 gigabytes of storage to sell sell for $149.99 (£74) and $199.99 (£98), respectively, in the US. A Zune with an 80-gigabyte hard-disk drive will sell for $249.99.

A Microsoft spokesman was not immediately able to give details of plans for a UK launch of the new players.

He said: "Europe is a priority market for us, but we have nothing specific to announce at this time. We will launch in Europe when we can deliver a tailored experience for that market."

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