Microsoft should not release a handheld for the following reasons:
1. Adding an extra handheld company would further break up the handheld market. Outside of Japan, there is little third party support for handhelds already and what support there is is divided between Sony and Nintendo. Adding another company would just create fewer games for each console.
2. To add to the point above, fewer games for each console would hurt Microsoft more than anybody. Nintendo has their first party games, and both Nintendo and Sony have Japanese developers...Microsoft relies more on third parties than anyone else and what they do have for first parties is devoted to the XBO. Like above, throwing a handheld into the market would decrease the amount of games elsewhere water down the market. The OP seems to present the idea that Rare could work on handhelds but not only has Rare lost a lot of its talent, but it also would not be able to release games at the same frequency as it did back in the SNES/N64 days (due to higher production costs and dev times).
3. Handheld territory is in Japan and Microsoft does not have the best history in Japan. I believe that a handheld that cannot stay afloat in Japan will have trouble making very much money.
With that said, I could see MS releasing a portable PC gaming device or a more games based phone device that may have moderate success while not competing directly with Nintendo and Sony...
