Zune phone really in the works at Microsoft?

The success of the iPhone, both the original and the recently released 3G model, has fueled rumors that Microsoft is working internally on a similar phone built on the Zune audio player.  The Zune player has failed to compete against the iPod family as grandly perhaps as Microsoft wished but perhaps the folks in Redmond believe a phone version might change that.

We have totally unconfirmed information from a reader who wishes to remain anonymous that Microsoft is indeed working on a Zune phone.  This source had information about a meeting this week in Redmond that was planning a Zune phone to compete with the iPhone.  According to this information the Zune phone will be based on a specialized variant of Windows Mobile 7 and key functionality will be centered around WIndows Live Services.

Source: jkontherun

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Tags: live, Microsoft, Windows, Windows Live, Windows Mobile, Zune