The company denies recent reports that it's working on a "ZunePhone" for Verizon Wireless, and it will focus on upcoming Windows Mobile upgrades.
Despite the latest round of whisperings, Microsoft is insisting it will not be making its own smartphone.
It's not the first or the last time the software vendor has been at the center of speculation when it comes to backing its own breed of iPhone or BlackBerry.
Whereas Windows Mobile competes with the likes of Research In Motion and Apple in building operating systems, Microsoft's rivals have control over nearly every aspect of their smartphones.
That's because they produce the hardware. Microsoft merely licenses its mobile OS to partners to build smartphones.
The company did not deny it was in talks with Verizon, but did say it was not interested in creating its own handset.
"Microsoft is not going into the phone hardware business," a spokesman said in an e-mail blast to reporters. "We're deepening our relationship with our hardware partners in order to create even better performing phones that are competitively priced, have the features people want, that are easy to use and just downright lust-worthy."
The company said it's focusing on updates for its existing mobile OS, and Windows Mobile 6.5 is expected to roll out in the second half of the year. This software update has a revamped user interface that makes Windows Mobile more finger friendly, and it beefs up the browser and enables it to utilize Adobe's Flash technology.
Microsoft also is preparing to bring out a competitor to Apple's highly successful App Store for the iPhone and iPod Touch. Windows Marketplace for Mobile will launch in the second half of the year, and it will offer users a way to browse, buy, download, and install applications over the air.