Microsoft Working on Digital Entertainment Handheld

According to sources in Redmond and Santa Clara, Microsoft is in the final design stages of a “digital entertainment handheld.” One of the sources for this story—all of whom chose to remain anonymous because they weren’t authorized to speak to the press—used the “xYz” moniker for the device [and I emphasize the “Y” in capitals to reflect the source’s highlighting of that letter out of the three] to explain to me that this “digital entertainment handheld” sits somewhere in-between the Xbox and Zune platforms, offering both gaming and media playback, as well as Internet-related services, all in a portable format. When I asked if such nickname implied that Microsoft will use a brand starting with the “Y” letter for this handheld, the source said: “As far as I know, the name of the device has not been decided yet.” The purpose of using that moniker, the source said, is to emphasize that this device is a mix of the Zune and Xbox platforms and, at the same time, a unique platform on its own. Another source consulted for this story confirmed the development of such mobile device, at least as of December of last year. This source defined the Microsoft handheld as “unlike anything on the market today,” and said that the only way to describe it is to “think of a mashup of the Sony Mylo, the PSP, and the iPhone… errr, the iPod Touch; [the MS handheld] doesn’t need access to a phone network.” That last sentence was one of the juiciest comments made, since the source wanted to emphasize this device lacks access to a phone network and that’s why he changed the iPhone example with the iPod Touch. Even if several analysts and publications have reported that Microsoft is planning to market its own smartphone, this second source told me not to expect any business application or user interface (UI) that resembles a smartphone. Furthermore, the source stressed: “Although the Microsoft handheld is definitely a converged device, this is not a Zune Phone.” The source added: “Microsoft won’t compete with its Windows Mobile customers.”

It’s the Software, Stupid!

Being a hardware geek, I would have preferred to learn everything about the handheld’s specs, but one source told me the most important aspect of this device lies is its software, services and the entertainment experience it offers. Even so, this source did confirm that the handheld is primarily “a portable game console and a media player.” The “xYz” is supposed to have a large WVGA touchscreen display and “hardware features not found on any handheld on the market.” Since I was informed about this, I’ve been trying to come up with specs that are not found on any mobile device currently on sale (more on that later). Once more, this source explained hardware is not the most important factor: “If it was up to the hardware, this device could launch sooner in time.” According to this source, Microsoft is waiting for other pieces of the puzzle to come together:

Key Piece of the xYz Puzzle

“This is a Live Anywhere device” the source reiterated several times. “There will be a single online marketplace; the lines between the Zune, Xbox Live and Sky marketplaces will blur when the handheld launches.” A quick search on the Internet revealed that Sky is the name of a yet-to-be-announced cloud computer service for mobile phones (similar to Apple’s App Store) that will host under its umbrella three services codenamed SkyBox, SkyLine and SkyMarket. It’s worth mentioning these comments regarding Sky were made to me in August of last year, well before the Sky codename would even appear on a Google search.

Live Anywhere

Buy a song, a movie or a TV show on your Xbox, play the content later on the handheld or the other way around. Play an Xbox Live Arcade game either on your Xbox or in this handheld. The source explained that many things Microsoft has implemented in the past, such as attaching your Gamertag to a Windows Live ID, will show this handheld is just one step in a carefully planned strategy that involves several Live branding services. The source also said that the graphical interface found in the New Xbox Experience will make its way onto the Microsoft handheld. The NXE user interface will be even easier to use on the handheld than on the Xbox 360, the source claimed. (Cover Flow-like navigation?) “When this handheld arrives, people will say it is Microsoft’s response to the iPhone, the Nintendo DS, the PSP, and so on, but it will be pretty evident that this device, its software, and services have been in the works for a very long time,” the source added.

Killing Four Birds with One Stone

According to one source, Microsoft will address several competitors with this handheld: Apple, Sony, Nintendo…and Google? “Yes, Google,” the source said. Is the device really that far-reaching that it can serve as a competitor to Google? This Microsoft mobile device will supposedly offer many Live Search services, such as Maps, News, Traffic and Video, and in this way, Microsoft would be counter-attacking the Google phones without competing with its Windows Mobile customers that manufacture mobile phones.

My Thoughts

There are things that cannot be explained in writing, because text cannot express tones, ambiguity and other aspects of an oral conversation. Employees providing such information of an unannounced product act like a sort of “Deep Throat,” being very cautious about every word spelled. Although neither source mentioned such spec, I got a feeling by the comments they made that the handheld will feature WiMax connectivity in addition to the standard Wi-Fi radio currently found in most portable devices. First, WiMax is one of the few features I could think of that practically no handheld device currently in the market has and second, the way the source told me that the MS handheld “doesn’t need access to a phone network” sounded cocky and intriguing.


WiMax (Worldwide Interoperability for Microwave Access) is a new wireless communication technology aimed to provide broadband access to the Internet without the need of cables. You might be thinking that’s exactly what Wi-Fi is, but that’s a common misconception. Most people tend to think that Wi-Fi is basically wireless internet, when it is in fact a technology for wireless access to a local area network—if that LAN has a router that allows devices on the network to, among other things, access the Internet, well that has nothing to do with the Wi-Fi technology. This possibility has lead people to believe Wi-Fi equals to wireless Internet. On the contrary, WiMax is truly wireless broadband Internet and that’s why it has been touted as a 4G service to distinguish it from the existing communication technologies called 3G. Whether 3G networks are wide-area cellular telephone networks that evolved to incorporate high-speed Internet access and video telephony, WiMax was born from the beginning as a wireless data transmission technology that will treat voice and video simply as another type of digital data. (You can read more about WiMax in this Questions & Answers paper provided by the WiMax forum.) The only WiMax handheld that I could find easily doing a Google search was this phone (can these communicators still be called phones?) from HTC (the manufacturer of the Google/T-Mobile G1 phone) called HTC MAX 4G. This “smartphone,” basically a WiMax version of the HTC Touch HD, is currently only offered for the Russian market, specifically for the Yota WiMax network. Available for 38,900 rubles ($1,000), the device is expected to eventually make its way to other markets. That will mostly depend on the rollout of WiMax networks.

In the United States, Comcast, Intel, Time Warner Cable and Google are investing $3.2 billion to combine Sprint Nextel and Clearwire into a single company that will build the first nationwide WiMax network. The service has already launched in Chicago, Baltimore, and Washington D.C. as initial test markets, with Boston, Philadelphia, and Dallas to follow before a nationwide rollout.


The other ace card up Microsoft’s sleeve could be NVIDIA powering the device with its all-mighty Tegra computer-on-a-chip, whose prototype has been called the “iPhone killer” by the specialized press and mobile geeks. It’s the only hardware I can think of that could provide a mobile device with some specifications “unlike anything on the market today.” As you can see in the picture below, which shows the Tegra-powered smartphone NVIDIA gives to manufacturers as a development unit, this mobile platform is the first one to offer HD-video output via a HDMI connector and the visual power of a GeForce GPU in the palm of your hand. According to NVIDIA, the Tegra offers the industry’s longest HD video and MP3 playback on a mobile device (over 100 hours audio and 10 hours HD video playback). It also features, among other things, a true dual-display system that lets you watch media on an HDMI display while using the Tegra-powered handheld as a remote control device. There’s definitely no smartphone or any other handheld whatsoever that offer such features.

Lately, there have been rumors that Microsoft is working with NVIDIA to create a Microsoft smartphone to compete with the Apple iPhone and the Google phone, but like I mentioned before, my source reiterated several times that there won’t be a Microsoft phone. It is worth mentioning that officially, Microsoft and NVIDIA have a partnership to assure that the first Tegra-powered smartphones run exclusively Windows Mobile. It will be up to hardware manufacturers and NVIDIA as to whether Tegra-powered devices ever run other mobile operating systems. Something worth mentioning is the fact that NVIDIA was the provider of the GPU and motherboard chipset used in the first Xbox, and at some point Microsoft and NVIDIA had to renegotiate the use of the technology found on the Xbox for the Xbox 360 to support backwards compatibility of the previous generation Xbox games– some of them also available for download as Xbox Originals on the Xbox Live Marketplace for the Xbox 360. Teaming up with NVIDIA would allow Microsoft to run Xbox Originals games on this handheld without having to run again into legal problems. Does the Tegra have the power to run Xbox games? May be not in its current iteration, but NVIDIA has already stated it plans to release a second-generation Tegra chip as soon as this year and a Tegra-III in 2010—even if the first-generation Tegra chips have yet to reach consumers’ hands.

Closing Comments

A recent budget cut to the Entertainment and Devices division, which includes the Xbox, Zune and Windows Mobile units, has revealed Robbie Bach’s group was definitely expending lot of money in R&D; as much as $250 million in only six months; so that figure confirms they were definitely working on something new — and I don’t think it is the third Xbox home console. Could the longer-than-expected recession affect or completely cancel the launch of a brand new platform such as a portable Xbox? Time will tell.

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