By Aidan Malley

Published: 05:00 PM EST

Parallels is launching a new test version of its Parallels Desktop virtualization software that, among other features, supports the iPhone. Also, a new report suggests that Google's first cellphone is well underway.

Parallels beta supports Expose, iPhone in Windows

Wednesday signaled the public release of a new beta for Parallels Desktop that promised multiple extensions blurring the line between native Mac and virtual Windows environments.

Significantly, the test update for version 3.0 adds full recognition of the iPhone in Windows XP or Vista virtual machines, allowing the device to sync with iTunes. The unusual change is necessary for those who may run Microsoft Outlook for work purposes and need its data on the Apple device, according to Parallels.

"Yes, I realize the irony of syncing an Apple device with Windows running on a Mac, but lots of people need [this]," said company PR chief Ben Rudolph. "Try not to judge."

The refresh also further blends Windows apps into Coherence Mode, integrating them with the Mac OS X Expose task switcher and adding drop shadow effects.

Other changes included restoring the Image Tool's features to let the user change the size and state of disk images, and the ability to browse a virtual machine's file system while the environment is in suspend mode.

The update is currently free and open to any public user already running Parallels Desktop 3.

Google funneling money into cellphone project

Reuters' investment guidance firm Anian has revealed in a recent report that Google's often-rumored cellphone project is not only real but has received a large infusion of cash on the road to completion.

While short on details, the report said that Google was taking the concept of its own cellphone seriously and had spent "hundreds of millions" of dollars designing and preparing for the device. Taiwan's HTC, which regularly produces and then rebrands phones for American and European markets, was purportedly designing a Linux phone on behalf of the Mountain View, Calif.-based search engine giant. T-Mobile would be the primary carrier for the phone in the US in early 2008 while Orange would service France and other areas, Anian said.

Google had also allegedly discussed deals with AT&T and Verizon for integrating Google service into their cellphone lines but had been turned down by at least Verizon, which objected to splitting ad revenue with the potential partner. All three American carriers said to be involved in the deal declined to comment.

The move by Google to create its own phone would complicate its relationship with Apple and other phone designers such as LG, many of whom already have installed custom Google map and search tools in recent models. The iPhone to date relies on Google's Maps utility and its search engine in the mobile version of Safari, but is expected to gain more apps over time.