By Zach Spear

Published: 12:00 PM EST

Microsoft chief executive Steve Ballmer, who once laughed off the iPhone, has now conceded to Apple's edge in the market while hinting at a very different future for his company's Zune players.

Ballmer told the Financial Times (registration required) that the iPhone and BlackBerry have "clear market momentum" in the smartphone business.

Shortly after the iPhone was announced at Macworld 2007, Ballmer lambasted the Apple handset as the "most expensive phone in the world" while noting that Microsoft sells "millions and millions and millions of phones a year" while "Apple sells zero."

"I'd prefer to have our software in 60 percent or 70 percent or 80 percent of [mobile phones], than I would to have 2 percent or 3 percent, which is what Apple might get," he said. And just this past September, the Microsoft headman predicted that the iPhone's tight integration with all things Apple would cause it to "lose out" in the long run.

As for the Zune, Ballmer said this week that consumers "should not anticipate" a Zune phone. Instead of persisting as a Microsoft-built hardware product, the device's core could eventually be integrated into other Windows-powered mobile devices, he explained.



Ballmer also said he believes the market for portable media players is in decline and will be replaced with general purpose devices like the iPhone and iPod touch.