Dallas research firm The Diffusion Group is predicting that Microsoft will debut a portable game console late next year or in early 2008. Microsoft is expected to combine a portable multimedia player with a handheld gaming device, similar to what Sony has done with its PSP, according to the firm.
The company is struggling with whether to license an Xbox operating system to hardware makers or to produce its own device, according to Diffusion.
There’s very little doubt that Microsoft is mulling this kind of device, and the company may already have several prototypes in hand. But where will it fit — or how would it stand out — in a universe of iPods, PSPs and Nintendo devices?