Microsoft is well aware that one of the key allures of Apple's iPhone is its music-playing abilities. To counteract that, the software giant said it will focus on improving the music features on its Windows Mobile operating system for smartphones.

"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," Andy Lees, senior VP of Microsoft's Mobile Business Communication, told Reuters.

Lees said the mobile music market represents a huge opportunity since consumers bought 10 times more music-enabled cell phones than iPods. Other studies forecast the market to hit $11 billion in three years.

Lees did not go into specifics, but improvements will probably center around the mobile Windows Media Player. An over-the-air music store with partners is possible, but some research suggests these services have yet to take off.

Apple is clearly the king of the hill when it comes to playing music on a cell phone. Thanks to its experience with the iPod, the company has made the iPhone a breeze for mobile music. The iPhone also has the advantage of being tied to the market-leading iTunes music store.

Microsoft has been focusing on its mobile platform in the face of stiff competition from Symbian, Research In Motion, Apple, and, increasingly, mobile Linux. Earlier this year, the company unveiled the latest version of Internet Explorer Mobile and said the software will bring "desktop-grade" Web browsing to mobile phones.

The company expects to sell 20 million Windows Mobile licenses in its current fiscal year, which ends in June. It also predicts sales will grow 50% the following fiscal year.