In a talk to high school students in the Seattle area, Microsoft Chairman Bill Gates gave an intriguing answer to a burning question.

“Is Microsoft going to develop a hand-held, you know, MP3 player, to combat iPod?” asked Schyler Mishra, 19, a senior at Seattle’s John Marshall High School.

Seattle PI reports: “Gates, appearing at the company’s annual Minority Student Day, had already complimented Apple, Google and other rivals during his speech, while also touting Xbox 360 and other Microsoft products. He smiled at the question and proceeded to give the students a lesson in the art of the indirect answer.”

“Yeah, Apple has done a fantastic job with the iPod. How many of you have iPods?” he asked, and a number of students raised their hands.

“We are talking with partners about how we, working with those partners, can make even better music players. We’ve got some in the market today. I’d say in total they have about 20 percent market share, which is lower than we like, and so we’re seeing where we can come together to make a device that’s less expensive and connects in better ways, does photos and videos in better ways.”

He added: “I don’t think what’s out in the market today is the final answer. But again, it just shows the magic of software. Apple did a very good job on iTunes, did the user-interface design right. That means we’ll have to match all that good work and do something even better. Between us and our partners, you can expect to see some pretty hot products coming out over the next couple of years.”

We’ll take that as not a “no” then.