I don't know...
Margins on hardware are very thin, and this is a highly competitive space. The biggest part of what entrenches the established players in this market is the product ecosystem (I need to be able to go to Walmart/Target and buy power cords, compatible external speakers, cases, and other compatible accessories; not to mention wide-ranging software support and applications). That, and I really think that the lifespan of the standalone handheld media player is very limited (ala Zune and iPod)...
Most devices will likely be moving towards multi-function handheld computers over the next two years or so, similar to the Android and iPhone OS devices available currently. There will likely remain a market for non-phone handhelds (for those who won't pay a monthly fee to the cell provider), but I think the days of the "Sansa" and "iPod Classic", with no application (or very limited) support are very numbered.
If only Microsoft could come up with a true mobile OS that wasn't such a piece of junk, we might really start to get some competition in the space. The Zune HD software is a good start, but that device is more of a "traditional" media player, as opposed to a true multifunction handheld computer. Sigh.... Maybe Windows Mobile 7 and Android 2.0 will finally take us somewhere good, but based on the previous let-downs, I'm not holding my breath.