Microsoft says Zune phone isn't unreasonable

To date, the focus of Microsoft's mobile phone business has been providing its Windows Mobile software to handset manufacturers, but the company said an integrated business model of making both device and software could make sense.

"It wouldn't be unreasonable to think at some point there might some integrated thing," Mindy Mount, chief financial officer of Microsoft's entertainment and devices division, told investors at Citigroup's global technology conference in New York.

Microsoft has sent mixed signals about the Zune phone. At the time it introduced the Zune last year, the company said a Zune phone was definitely part of its future plans.

Earlier this year, Chief Executive Steve Ballmer said at a CEO forum that the Zune phone is not a concept that Microsoft would ever pursue. But he then said it could easily add music or gaming functionality to its Windows Mobile platform.