Why, exactly? The Zune, while it isn't failing, has not had anywhere near the success Microsoft hoped. What Ballmer said months ago is more true to reality than the idea of a Zune phone, and that is coupling more “Zune” features into their already successful Windows Mobile. While Microsoft themselves do not have a handset, many smartphones do rely on Windows Mobile. Perhaps they have some leverage there – and indeed it may make a lot of sense to extend features on it like this.
Apple does have a huge one-up on Microsoft, and that is their ability to promote and get people interested in new gadgets. The Zune is definitely no iPod killer, and a zPhone would probably meet with the same fate.