Microsoft working on handheld entertainment device

In a bid to capture the huge audience for handheld entertainment gadgets, Microsoft is designing a product that combines games, music and video in one handheld device, according to sources familiar with the project.

The Microsoft product would compete with Sony, Nintendo and Apple Computer products, including the iPod. And Microsoft has some of its most seasoned talent from the division that created its popular Xbox 360 working on it.

Mercury News - Microsoft working on handheld that plays games, music

To that we can add Takahashi’s claim that Transmeta’s got 30 engineers working on a Microsoft-related project, which makes sense if the unit’s to combine the low power consumption required by a handheld and compatibility with the Xbox 360’s PowerPC CPU.

Dean reckons Microsoft’s handheld won’t surface until 2007 or even 2008 but when it does it will have the strength of the Xbox brand behind it and probably a content sales service, codenamed ‘Alexandria’ - after the famous library, we’d say.

The Register - Handheld Xbox: third time lucky for MS’ iPod killer scheme?