ZDNet reports that they have gotten a few tips that Microsoft is working on some sort of "Zune HD2" device that could possibly ship later this year, or by my guess next year if it exists at all. The main factor of this is that the HD2 will supposedly be based off of Windows Phone 7, Microsoft's newest mobile operating system which is due to come out by the holidays 2010.

They say it will be similar to the way the iPod Touch was based off of the iPhone OS. The HD2 of course will not have a phone. Microsoft also reportedly urged developers for the Zune recently to migrate their applications over to Windows Phone 7 Series for compatibility.

Zune HD was the first version of the Zune that people actually took seriously from Microsoft. Everyone seemed to have blown off the first Zune as a failed attempt to copy the iPod, but when Microsoft released the Zune HD with its OLED screen and slick features and design, people really started to take it into consideration. It will be interesting to see how the mythical HD2 will follow up, if it even exists.