Lets be honest here. M$ have brought some good innovation to console gaming, namely good online service and achivements.
But the type of innovation tha Nintendo does is not M$ strong point. M$ would be silly at this time to bring out a handheld. It needs to be something more than good Live interactivity. That would only get M$ so far.
Nintendo rule the roost with handhelds, and Sony PSP sells very well. It just looks bad next to DS.







