Zune Phone to come out soon?

I think it's interesting Microsoft is thinking and willing to release a new gadget. Especially a phone since there are so many big competitors out in the arena. They will have to come out with something truly amazing and unique to be able to battle it out in the smart phone arena. It will be interesting to see what Microsoft comes up with though.
I already own an 80gb Zune and I'm happy with it, but I just can't see Microsoft making a good and worthy phone gadget. I think they did a good job on the Zunes, and decent on the 360's, but noting their track record with current software and the problems they've had with hardware makes me hesitant to say this will be a success, if they do release a phone.