Microsoft Prepping Zune Phone for Windows Mobile 7?

By Tara Seals

A minor firmware update to Microsoft Corp.’s Zune PC-media player and synching software has sparked speculation that the software giant is planning to turn its Zune music player into a smartphone.

Blogger Long Zheng installed the update and then examined the code, finding three references to phone devices, inside the installer file—pieces of code that could be voice drivers.

His findings echo what an analyst has been predicting. Jefferies & Co. stock analyst Katherine Egbert told investors that “our recent industry checks indicate Microsoft will be debuting its own phone sometime in the next two months. We expect the new phone to debut soon, at either the Feb 15-18 Mobile World Congress conference in Barcelona, Spain, or possibly at CTIA in Las Vegas one month later.”

Microsoft has a major announcement coming up at Mobile World Congress, where it’s expected to unveil Windows Mobile 7. Egbert said the Zune phone would be one of the first Windows Mobile 7 devices that Redmond builds.

Microsoft has denied the rumor, of course. “As far as a ‘Zune phone,’ we have no plans to create a Zune phone,” a Microsoft representative told Neowin. “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.”

Zune or not, it’s likely Microsoft will soon debut branded handsets, similar to what Google has done with Nexus One. Project Pink at Microsoft is tasked with—reportedly—designing one or more Windows Mobile-based smartphones leveraging the company’s Danger acquisition, a mobile software and services unit. Egbert noted that MSFT is “partnering with a few OEM manufacturers,” on something that would have a 5 megapixel camera, 720p HD video capabilities and the undefined premium mobile services promised by Microsoft when it comes to Windows Mobile 7—presumably multimedia applications and social networking integration, along with GPS and other smartphone table stakes.