Microsoft Seen Eyeing Handheld Gaming Market

Dr. Dobb's has some more about the rumored portable gaming device from Microsoft (MSFT). Thomas Wolf at The Diffusion Group and co-author of the report that has caused such a stir said, "It makes perfect sense for Microsoft to enter the portable gaming market by 2008. There's no point in the past 15 years where the industry has sustained this type of competition we're seeing today, and Microsoft has the brand power and marketing budget to pull it off."

Lazard Capital Markets LLC analyst Colin Sebastian said, "Microsoft has thought about it, but the ultimate decision isn't conclusive. Strategically, they would enter the market for several reasons."

Lazard Capital estimated "U.S. game software sales for Sony PSP at $546 million in 2006, up from $420 million last year. Nintendo DS should reach $375 million, up from $258 million; compared with Nintendo Gameboy Advance to reach $783, up from $744 million."

Sebastian added, "The manufacturers typically take a loss on the hardware, but get a nice royalty on each piece of software. The console makers want to get more hardware into the market to drive software sales."

Evan Wilson at Pacific Crest Securities said, "It would be difficult and expensive project. It's not something Microsoft hasn't done before, so they would need to launch a whole new video game platform. Microsoft has been working on turning a profit since 2001, and they've only now begun to see success now."