The Redmond software giant has a team developing a portable game, music, and video player.

March 21, 2006

Microsoft is reportedly developing a portable version of its Xbox video game console in a bid to compete with Sony and Nintendo in the handheld game player market.

The device under development, which may be named the Xplayer, will also rival Apple’s popular iPod line of devices as it will also be able to play music and videos.

The Redmond software giant may be working with chip maker Transmeta on the device, according to Monday’s edition of The San Jose Mercury News, which attributed the report to unidentified sources close to the project.

Microsoft spokesperson Carlos De Leon said in a statement, “As a policy, we do not comment on rumors and speculation.”

The project is reportedly being spearheaded by Microsoft vice president J Allard, and it is being directed by Greg Gibson, who designed the system for Microsoft’s Xbox 360 game console. The business side is under the authority of Bryan Lee, who was finance chief for the Xbox 360.

The project is still in its early stages and Microsoft has in the past shelved its plans several times for portable game players as an offshoot of its Xbox. But the company seems more serious this time given the success of the Xbox 360 in the market since its introduction late last year, as well as the popularity of the Sony PSP and Nintendo DS.

On Tuesday, Microsoft announced plans to increase production of the Xbox 360 to meet the expected demand produced by Sony’s delay of the PlayStation 3 (see Sony Delays PS3 to November). Beginning this week, Microsoft plans to distribute two to three times the number of Xbox 360 units to the retail channel weekly.

The company also announced Tuesday it would offer additional games for the Xbox 360. “Today we have turned a major corner,” said Peter Moore, corporate vice president of Microsoft’s interactive entertainment business.

“With more consoles on their way to retail, 80 games available by June, and new content and experiences coming to Xbox Live all the time, there has never been a better time to own an Xbox 360,” he added.

Reorganizing for Battle

Another sign of development of the portable player is that last December, Microsoft reorganized the company to give greater priority to developing the portable device.

It’s possible that once the Xplayer project was approved, Microsoft appointed Robbie Balch, who had been in charge of the Xbox, to lead the Entertainment and Devices Group, which includes the Xbox and other products (see Microsoft’s Consumer Focus).

Microsoft is reportedly still trying to decide on what to do with the device’s music technology and music service. The company already has an MSN Music site to rival Apple’s iTunes where customers can download and play music, but the music service it is developing to integrate with the device is reportedly code-named “Alexandria.”

But Microsoft has to be careful to avoid competing with the portable media players from companies such as Creative Technology, Archos, and Samsung that already use Microsoft’s software platform. Some of these music devices include games and video as well.

Earlier this month, Microsoft unveiled the “Origami” ultra-mobile personal computers it has been developing (see Microsoft Reveals Origami). This type of device could be another step in the development of a portable game player.

The portable game business is also not always friendly to new entrants, and Nintendo has long dominated the $4.5-billion global portable game market.

Recently Gizmondo-maker Tiger Telematics went into bankruptcy in its European division and has lost hundreds of millions of dollars trying to enter the portable game market.