There was a rumor last year where Zune and Windows Mobile would come together to develop a Zune smartphone, a.k.a. the Zune Phone, or Zune 3.  But, there didn't seem to be enough momentum to build on at the time.

With Microsoft's acquisition of Danger, maker of the Sidekick phone, and the promotion of Mr. Allard, VP of the Zune and Xbox divisions, to Chief Experience Officer and Chief Technology Officer of Entertainment and Devices Division, the chances of such a development becomes more feasible.

Over at jkOnTheRun, an anonymous source claimed to have knowledge of secret Microsoft meetings involving the future of a Zune Phone.  James Kendrick added, "The timing of this alleged meeting is interesting as it coincides with reports of big shakeups in the Windows infrastructure at Microsoft."

It's even possible that the Zune Phone has been in the works since 2006.

Prediction: Microsoft will formally announce the intention to release a Zune Phone by the end of 2008.  For favorable judgement, ALL of the following criteria MUST be met.

1) It is a smartphone

2) Based on Windows Mobile OS

3) Based on Zune user interface and brand

4) Formal announcement made/confirmed by Microsoft by the end of 2008

Let the community decide.  Place your bets!