Yeah I know, a MS handheld would bomb really hard at this point. I'm just saying I think that's what OP is asking about. We all know MS have their own phones/tablets.

WHY NOT? more option for us

That's an unpopular opinion at a moment where the future of handhelds is seen as not bright due to the success of powerful smartphones. Entering the handheld market would require tremendous amounts of preparation, and I don't think MS is up to the task right now. In fact, I don't think entering the handheld market with a big budget is not wise for any company at the moment. I reckon entering the market would be easiest with a handheld/smartphone hybrid or some very innovative feature that would seperate the handheld from smartphones properly.

Another victim for Nintendo to eat?

It would flop faster than the 3D0

No. Dedicated gaming Hhandhelds are a red ocean. Dead and not profitable. MS has been smart not to get involved.

Plus, Nintendo soaks up what little handheld market is left with their family friendly IP. Sony and MS cant compete with that.

Pff, handhelds? I think they should enter the Walkman market. I heard that's the hottest shit right now. But they need to make sure their machine has Blast processing power too, otherwise it'll have no chance.

I think they would be smarter to just add a analog like slider pad to their Surface tablets and Windows phones. And two discreet shoulder buttons.

IMO you really don't even need full controls on a tablet/phone to dramatically increase the gaming experience. It doesn't have to be a giant 360 controller layout.

The biggest problem is the lack of a direction input ... a small analog nub/dpad/stick solves that issue.

2 shoulder buttons would make most genres of games playable from sports games to FPS to racing games and platformers.

PSP + Full Throttle is so awesome.

I haven't read the entire thread.... but doing a pure handle ala vita or DS is not a good idea IMO for reasons given by others.... ( shrinking market, japan not an MS friendly country etc) on the other hand now that they have a Nokia phone rights for a decade and are involved into portable PC hardware.... they could do a nice phablet (PC?) that is optimized for gaming especially with intel coming up strong with x86 lowpower chipset.... maybe they could find a way like you said to port easily the arcade portfolio to the windows store or something... especially after windows threshold releases, if indeed the market place finally converge in one harmonious ecosystem.... this could be a nice alternative to a pure handheld for gamers that still want a phone or a tablet but not a second device for gaming on the go