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Making a handheld is a risky proposition. There's a reason why Sony didn't even try until 2004: it's expensive and Nintendo's track record in that sector is infallible. Kind of hard to topple someone who's been on top since they basically created the market in the 1980s.

I don't see what MS could bring to the table, either. Vita's already doing everything an MS handheld would do. It seems in MS's best interest to just keep making games for Nintendo's handheld systems.