The Diffusion Group: Microsoft to Enter Portable Gaming Market in Late 2007/Early 2008

The Diffusion Group predicts that "Microsoft (MSFT) will likely leverage its Xbox franchise to enter the portable game console (PGC) market in late 2007 or early 2008." According to TDG, "Microsoft is expected to embed a portable multimedia player in a handheld gaming platform similar in many respects to Sony's PSP."

Thomas Wolf at TDG said, "Microsoft has been waiting on the sidelines until its gaming console and software business reached sustainability, all the while watching closely how Nintendo and consumers in general would respond to Sony's PSP. With global PGC revenues expected to reach $3 billion annually by 2008, and with only Sony and Nintendo active in the PGC space, Microsoft has before it an incredible opportunity. It has a critical brand presence in the console space, the breadth and depth of gaming titles, and the marketing clout necessary to enter this space and win decent market share."

TDG thinks "Microsoft has been evaluating two options regarding its portable gaming strategy: licensing a version of its Xbox OS for others to build portable hardware designs upon, or introducing its own branded PGC."

Michael Greeson at TDG said, "While licensing the software is consistent with Microsoft's larger strategy, and no doubt Microsoft has endured many failures in regard to hardware plays, the success of the Xbox presents Microsoft with a unique opportunity. Microsoft owns an established and highly-regarded hardware brand, meaning that they can enter the PGC market from a position of strength, a privilege not enjoyed by any other player except those already active in the PGC space."

Sounds like a good move if it's seamlessly integrated with XBOX Live...