Microsoft is still telling all that will listen that they have no plans for a Zune phone, but instead continue to focus on the development of the OS that powers a variety of phones. The company also expects the sales of media players to decline, with trend toward multi-purpose devices to continue and grow.

The company suggested that it does have what could be dubbed a “Zune phone core” that could make its way into other devices, but not sold as a Microsoft-branded device. The “Zune phone core” may eventually be integrated into Windows Mobile.

Given the current economic situation and the fact that Microsoft is arriving so late to the party with a Zune phone offering, it is likely a smart move by the company to stay on the sidelines and just collect royalties while the likes of Apple and RIM fight it out. While it might be a missed opportunity that Microsoft could regret down the road, we don’t think so.