Even More Microsoft Handheld Speculation

Following up on The Diffusion Group's prediction that Microsoft (MSFT) will enter the portable gaming market in 2007/8, 1UP.com has a Q&A with Michael Pachter at Wedbush Morgan Securities "to pick his brain on the prospects of a handheld platform from Microsoft." Here is is:

On the prospect of Microsoft entering the handheld market:

It is likely that Microsoft will enter, although it is not a sure thing that they will succeed. My basis for believing that they will enter the market is the reorganization of the Home Entertainment division, and the move of Bryan Lee to head of a new group. Bryan's group sounds like 'convergence,' although the name is something more innocuous. However, when you combine that move with Bill Gates' comments at E3 about how Vista will allow convergence of Xbox 360, PC and mobile devices, it seems far more likely that Microsoft will have a mobile device to offer to consumers at some point in the future.

On what kind of device Microsoft will enter with:

My bet is that it is NOT [a primary gaming device], unless it is some type of hybrid convergence device. I believe that the company is interested in turning the Xbox 360 into a media hub, and they are interested in offering a handheld device that will allow downloading of movies, television programs, music and games. Sort of a reverse-engineered iPod. Although the iPod form factor is exceedingly cool, I think that Apple would have preferred to make the device more game friendly.

So if it's not a primary gaming device, what kinds of games will it play?:

My guess here is that the device will be closer to a cell phone in terms of the types of games (mostly puzzle/arcade games), and less of a PSP-type device. I'm not convinced that Microsoft wants to offer more packaged software; rather, I believe that they want to use the mobile device to drive user activity on the Xbox 360. The handheld I envision would make the Xbox Live experience more satisfying.

On how to introduce the platform, considering Microsoft's necessary focus in 2007 on software for the Xbox 360:

If I'm right that this is not primarily a gaming device, the right way to introduce it is at CES. I'm not sure how far along they are, as I only heard the first rumors a couple of months ago, but think that it is likely close enough to unveil at 2007 CES in January, and launch a year or so later. Again, if I'm right, this is merely a sideshow at E3.