Microsoft: We're Still Not Making a Zune Phone

On Tuesday, Microsoft quietly unveiled a minor upgrade to its little-used Zune PC software, which provides media player functionality and synchronization capabilities for the company's Zune portable players. But after a blogger uncovered references to three unnamed "Phone" devices in the PC software's installer files, speculation arose—again—that Microsoft would soon start offering Zune-branded smart phones.

However, once again, Microsoft has strongly denied these rumors.

"As far as a 'Zune phone,' we have no plans to create a Zune phone," a Microsoft representative told Neowin's Tom Warren yesterday. "It makes sense that someday Zune could be part of a phone experience, but there have been no announcements about how or if that will happen."

Examining the Zune installer files, there's really not much there. Yes, one of the installer files references three new and unnamed Zune devices in addition to all the currently shipping models. And yes, later in the same file, the word "Phone" does appear—also a first. But they're not necessarily connected and certainly don't point to the existence of a Zune Phone. Indeed, it's far more likely that Microsoft is working under the covers to add support for Windows Mobile and/or Danger phones to the Zune PC software, which would allow users of those smart phones to more easily access Zune content. (Windows Mobile devices are already compatible with Zune subscription content, although Microsoft has been quiet about that capability for some reason.)

That Microsoft is working to meld Windows Mobile/Danger and Zune is, of course, just speculation. But with Mobile World Congress and an expected unveiling of Windows Mobile 7 occurring next month, many tech bloggers and reporters are starting to pay more attention to Microsoft's mobile moves. And although the oft-rumored Zune Phone is a fun target, Microsoft has more pedestrian releases that are definitely happening in the weeks ahead, including some important updates to Windows Mobile 6.5. Given the very basic media capabilities in that OS, it makes a lot more sense that Microsoft could be shoring up its existing products rather than prepping the Zune PC software for some supposed new phone.

There is evidence to support the notion that Microsoft won't build its own phone, although rumors continue to swirl about Microsoft releasing its own smart phone, whether it be Windows Mobile-based or the mythic Zune Phone or the "Pink" device that ZD Net blogger Mary Jo Foley has written about. When Google revealed last month that it would sell its own Nexus One smart phone directly to the public, Microsoft president Robbie Bach—the man most directly responsible for both Zune and Windows Mobile—said it was a horrible idea that would "alienate" its smart phone maker partners. The inference is that Microsoft would never do such a thing.

And Bach should know why this strategy is a mistake, as Microsoft went the build-it-yourself route over three years ago with the Zune portable media player. That strategy failed wildly, and Microsoft did in fact alienate all kinds of partners (including those who previously created Windows Media-based portable players, online services, and software) and bifurcated the market, essentially handing it to Apple. Meanwhile, Zune hardware sales have been so horrible that Microsoft has actually scaled back its plans and now positions Zune as a media brand while it deemphasizes the portable player.

Given its experience, why would Microsoft ever make its own smart phone?

Actually, as it turns out, such a thing is still possible. Although the Zune hardware has indeed been a failure, MP3 players aren't exactly a central market for the software giant. But smart phones, and the software systems that run them, are very much central to Microsoft's business. As consumers and business users alike flock to smart phones, these tiny, mobile, and always-connected devices will eventually replace traditional PCs as the mainstream computing experience. In fact, that's already happened in many third-world countries and emerging markets.

So Microsoft's denials, while notable, might not be the end of the story. Rumors about Zune Phones and "Pink" devices and other skunkworks projects might or might not be real, but they are most certainly based on information that comes out of Redmond. On a trip to Microsoft's campus last year, for example, I heard the phrase "Zune Mobile" from two separate employees, and Microsoft has been known to be getting more intimately involved in the creation of smart phone designs that are—for now—made and sold by third-party device makers. So, anything is possible.

Today, however, what we have is a mystery. There's a little evidence to support the fact that Microsoft will make its own phone, possibly even a Zune Phone. There is more evidence that Microsoft will instead add support for Zune software and services to current systems such as Windows Mobile (and, as it turns out, the Xbox 360). And we know that announcements about Windows Mobile 6.5.x and 7.0 (and next-generation Danger devices) are coming.

Presumably, this mystery will soon be resolved.

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