Report: M'soft working on handheld

Sources say Microsoft is working on a portable machine and iTunes-killer, but gaming implications aren't clear...yet.

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Robbie Bach, who previously oversaw the Xbox division at Microsoft, is apparently working on a new project within the company, according to the New York Post and Reuters.

Bach, whose role in the game group over the past year has resulted in far less visibility, is apparently leading the charge on a portable device, say sources cited by both news outlets. However, the device may focus on music and be the mythological "iPod killer" that has been long rumored.

"It seems like an exact head-to-head competition with Apple," one source told the Post. "It's really like an Apple approach, to control the device and the whole stack of technology. This is like Xbox versus PlayStation."

The question is will it also be like the PlayStation Portable versus the DS? While the report goes into detail about a possible challenger to the digital music throne, currently held by Apple's iTunes, it doesn't mention gaming specifically, though many have predicted that Microsoft is working on a portable gaming device.

The handheld could be the first steps, though. Microsoft has insinuated that an iTunes-like digital music service would be a perfect fit for the Xbox 360, further expanding the reach of Xbox Live Marketplace. The company has also signed deals with record labels, including Warner Bros. Music and Epic Records (incidentally, part of Sony BMG), for Xbox Live Marketplace content.

With the Xbox 360 positioned as a home-entertainment hub, Microsoft could be readying a handheld that does it all--plays games, downloads music, and shows videos.

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