Not that this would be the first time an exec was caught lying through his teeth about future products, but for the time being Ballmer is sticking to the idea their won't be aphone coming from .
It's not a concept you'll ever get from us. We're in the Windows Mobile business. We can put Zune into Windows Mobile, we can put Xbox into Windows Mobile. We can pour everything in. We wouldn't define our phone experience just by music. A phone is really a general-purpose device. You want it to make telephone calls. You want to get and receive messages — text, e-mail, whatever your preference is. You may want music, you may want to play games, you may want to carry your contacts with you, and you may want to pay for things. I think we have to think about the phone instead of as a fixed-function device, a phone is really kind of a general purpose device that we need to have clean and easy to use.
Interestingly enough, he does say that they could toss Zune (And) functionality into Windows Mobile. Sneaky, Sneaky. I guess they'll just let the phone manufacturers assume the risk, while reaping the rewards.
Ballmer: No Zune Phone [WMExperts via Seattle PI]