iPod, PSP still in Microsoft's sights

iPod, PSP still in Microsoft's sights

Microsoft is designing a new handheld gaming device that can also play music and video in a potential challenge to market leaders Sony, Nintendo and Apple Computer, according to published reports.

The company has assembled a crack team of engineers from its Xbox division to work on the product, which may take a year or even two years to reach the market, the reports said.

The project is being led by game executive J Allard and directed by Greg Gibson, the system designer behind Microsoft's Xbox 360 console, according to a report in Monday's San Jose Mercury News. Microsoft reorganized its gaming and entertainment divisions to assemble the team for the project, an indication of how seriously it is about building a successful rival to Sony's PlayStation Portable (PSP), the paper said.

The Mercury News, and a similar report in Tuesday's Wall Street Journal, cite unnamed sources familiar with the company's plans. The Journal story said the device could possibly ship by the end of the year, although the Mercury News said it would be a year or two before it is ready.

Microsoft declined to comment on any plans for a new product.

Rumors of a new Microsoft device have been circulating for months, in part because chip company Transmeta confirmed it was providing design services for a new, unspecified Microsoft project. Transmeta's chip technologies help reduce power consumption, an important consideration for portable devices.

Microsoft recently took the wraps off of one secretive effort, its Origami project to build ultramobile PCs. The new gaming device appears to have a more purely entertainment focus, the reports said. Microsoft trails Sony's PlayStation2 in the home console market, and Sony and Nintendo's market leading products in the portable gaming market. The company also has yet to come up with a reply to Apple's iPod music player.

Trying to build a device that combines both gaming with music, and even video as well, may not be the answer, said Daren Siddall, a principal analyst with research company Gartner. The trend in music players is towards small, while gaming machines need to be big enough to accommodate comfortable controls, he noted.

"When you start converging the devices it becomes much more experimental. You have to compromise somewhere," he said.

Paul Jackson, a principal analyst with Forrester Research in Amsterdam, said the music-playing functionality is more likely to be an extra "nice to have" feature, rather than a core selling point of the device, which is likely to focus on gaming.

Apart from the Xbox, Microsoft doesn't have a great track record designing hardware products, he noted. The video-playing Portable Media Centers it helped design and which are sold by partners like Samsung and iRiver are relatively expensive and locating content for the devices could be easier, he said. "They haven't really set the world on fire," he said.

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