The Microsoft Zune Phone has been rumored for quite some time now and there is still no word on WinMo7. Perhaps the Zune Phone is coming out really soon.
The latest software update for the Zune Player has references to what one can speculate as the Zune Phone. If you watch the above image closely, you can find the text Phone.DeviceDesc which hints at a Phone variant of the Zune Media Player.
Some reports indicate that the ZunePhone might be powered by Windows Mobile 7 and that it will be produced in association with a OEM Hardware manufacturer similar to the HTC- Google Combo for the Nexus One
With Windows Mobile market share going down considerably, a Zune Phone should do some good for Microsoft. But we have to wait until Mobile World Congress next month to get some official info from the MS Camp.