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Several years ago, speculation about a Microsoft handheld might have been thrown out as purely ridiculous. At that time, the Redmond, Washington company was still testing the waters with its Xbox 360 console, and wide market acceptance of the hardware, as well as Microsoft's Xbox Live service, was still undetermined. Now, with the company enjoying significant marketshare in both American and European markets, the notion that Microsoft may want to expand its horizons into new gaming devices is not so fantastical after all. There are signs that a handheld device is in the works, which integrates all of Microsoft's services and is intended to compete directly with Nintendo's DSi and Sony's PSP handhelds. Two potential names for the device have already been leaked: the xYz and the ZuneX. But what would such a portable device look like, and how would it be able to successfully differentiate itself from other offerings in the handheld gaming space?

Just as an Apple gaming console appears more and more inevitable, Microsoft must be eyeing the success of the iPhone and DS as reason enough to muscle its way in to the handheld entertainment market. This would be the second time for the company, following the mediocre reception of its music and video playing Zune. However, the encouraging profitability of the game division at a time when other product lines are faltering may give the company the motivation required to tempt fate a second time with a more versatile gaming/multimedia device.

Strong indications from industry leaks suggest this is exactly what the company is doing, with an announcement upcoming at E3. According to sources in Europe, the device will be called the ZuneX. It will feature a landscape orientation like the PSP, with face buttons on each side of the screen (analog stick offered as peripheral attachment). The device would sport an impressive 32GB of on-board flash storage, as well as expandability via SD card. It would run both original titles and Xbox Live Arcade games. Another source is calling the handheld the Microsoft xYz, because it is intended to unite the console and zune parts of the business. The xYz is rumored to do everything the ZuneX can, but includes WiMax wireless connectivity and integration with Microsoft Live Search to compete with Apple's iPhone.

One thing that will definitely have to be sorted out for this to work is pricing. Currently, downloadable and streaming movies on Microsoft's service are overpriced and laden with DRM limitations. In order for the iTunes competitor to really take off with consumers, prices will have to come down to a more reasonable range that puts them in the impulse purchase category. Even the price of Xbox Live Arcade games has started to inch upwards, at a time when the economic recession would seem to demand more competitive pricing of downloadable content. If Microsoft could streamline its downloadable offerings and bring the best aspects of the Xbox experience to a handheld platform, then a new portable gaming system could prove to be a success.

                                           

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