Well, it was never actually alive, really, more just speculation and rumour. Now Microsoft have gone all official and announced that they're not working on a Zune phone, nor do they intend on creating a phone that will challenge the iPhone.

Speaking in an interview with Germany's Frankfurter Allgemeine Zeitung, Bill Gates said: "No, we won't do that. In the so-called smart phone business we will concentrate solely on software with our Windows Mobile program."

"We have partnerships with a lot of device manufacturers from Samsung to Motorola and this variety brings us significantly more than if we would make our own mobile phone," he added.

More info after the jump.

What he means is that by releasing software that can challenge the iPhone (such as the forthcoming Windows Mobile 7), and letting the world's biggest and best tech companies take on the challenge of developing the hardware that makes full use of the software, Microsoft is in a much stronger position to challenge the iPhone than if it were to release it's own mobile phone device.

What this means ultimately is that a Microsoft Zune phone is definitely not on the agenda, but that iPhone-beating phones based on Windows Mobile 7 definitely are; and given how weak the Zune MP3 player was, that has to be a good thing!

[Source: Reuters, via Pocket Lint]