Study: Microsoft to launch portable game console within two years

Fresh off its early lead in the next-generation console wars, Microsoft appears poised to put out a portable video game device by late 2007 or early 2008, according to the Diffusion Group.

In a Wednesday release, the analyst firm touted its new study, called "On the future of portable game consoles," which suggests that Microsoft is getting ready to challenge Sony's PlayStation Portable.

The idea, the firm said, is that with Xbox 360 firmly entrenched as the (current) market leader, Microsoft is now ready to take on the lucrative handheld gaming device market, especially since there's a predicted $3 billion in annual sales at stake.

According to the Diffusion Group, Microsoft has been trying to decide between licensing the Xbox's operating system to other manufacturers and making its own device. And now, the firm said, it looks like Bill Gates and Co. has made up its mind.

"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 (it) with a unique opportunity," Michael Greeson, CEO of the Diffusion Group and co-author of the study, said in the release.

Well, one can certainly see why Gates would want to go after the PSP and Nintendo's DS. Those devices have sold millions of units and, because of their multimedia features, can be found just about anywhere these days. Clearly, Microsoft wants to be considered a player in that market, even if it is late to the party. After all, that strategy worked with regular consoles.

Will it work? Microsoft's history suggests that if it does move forward, its initial foray will be good, if not great. But watch out for the second iteration.