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Robbie Bach, president of Microsoft's entertainment and devices division, told the San Francisco Chronicle that Microsoft meets the needs of different people who want different types of phones.

"We think that is going to continue, and we think Windows Mobile is in a great position to service all those different opportunities," he said.

"We will outsell the iPhone, we will outsell the BlackBerry."

But no phone from the company that once said it had no plans to release a music player.

"We don't make phones ourselves," Bach said. "We don't have any plans to make phones ourselves."

Meanwhile Apple's iPhone business appears set to go from strength to strength, with the anticipated release later today of version 2.0 of the iPhone software, with third party applications and enterprise-class features, and a new 3G handset.