Microsoft’s move clearly indicates that it is preparing to counter Apple’s iPhones that attract mobile phone users with its advanced music-playing capabilities.

"One thing that Apple has leveraged on is the music scenario, and I think that is something the operators and ourselves are partnering on, just to make sure that consumers can use live music in the best way," said Andy Lees , senior vice president of Microsoft's Mobile Business Communication, in a statement.

Lee foresees a huge potential in the mobile music market because there has been a sudden increase in the demand for music-enabled mobile phones. He believes they surpass other music gadgets like iPods in their ability to pull the crowd. Studies forecast that the market of music-enabled mobile phones will hit $11 billion in the next three years.

Microsoft has not disclosed the details of the improvements on the music features of the mobile phones. It is likely that the company will focus them around Windows Media Player for mobile phones. Also, chances are that the company will partner with other companies for over-the-air music stores.

Apple iPod, together with its online music partner iTunes, offers a music extravaganza to the music enthusiasts. Apple’s dominance over its competitors is likely to continue in the future. Apart from Apple, Microsoft also faces challenges from Symbiam, Research In Motion, and mobile Linux.

Earlier this year, Microsoft released the latest version of Internet Explorer Mobile with an aim to bring “desktop-grade” Web browsing experience to mobile phones. In addition, the company also announced the release of Windows Mobile 6.1, an update for its Windows Mobile software that includes new timesaving features, easier phone navigation and management, and increased security safeguards. Mobile phones with these features installed are expected to reach the market by the end of 2008.

“People want a single phone that’s flexible enough to meet their needs throughout their day, whether it’s connecting to work or your everyday life,” said Robbie Bach, president of the Entertainment and Devices Division at Microsoft, in a statement.

“The innovations we’ve added to our Windows Mobile software ultimately make it easier to manage your world,” added Bach.

Microsoft expects to sell 20 million Windows Mobile licenses in its current fiscal year, which ends in June. With these improvements the company expects a 50 percent growth in its sales in the following fiscal year.