Microsoft is developing a new version of its Zune portable music and media player that doubles as a cell phone — in direct competition to Apple’s recently announced iPhone — according to CrunchGear, a TechCrunch Network blog. It will be a smart phone that will work with the Zune marketplace. Further, it will likely not run on Windows Mobile but instead use similiar interface as the Zune. It will be able to connect with the Xbox 360 and stream video from the system to the phone wirelessly. The Zune phone is tentatively scheduled for release in the fall of 2007. Apple is set to ship the iPhone in June.