Microsoft may well be in talks with Sony to make some kind of alliance against Apple in the digital music arena. It's kind of to be expected, given that Microsoft always wants in on the action of anything that looks remotely fun. Gates has said that the two companies could benefit from a broad partnership in digital entertainment, although nothing formal has been announced, of course.
Microsoft contends that Apple's iTunes online music store sells songs in a format that can be played only on iPods and not other portable music players based on Microsoft's software, so consumers need a choice.