Microsoft still wants to build its own Xbox handheld in the future, but Microsoft has decided to prioritize its teams to improve Windows 11 gaming performance, specifically for devices like the ASUS partner device "Project Kennan." It's possible that the existential threat from SteamOS, which on paper delivers better gaming performance than Windows 11 itself, has informed these decisions. Our sources have indicated to us that Microsoft is still deeply investing in developing its own Xbox gaming handheld technology in the future, but it was announced internally today that the priorities are moving more deeply towards third-party OEM handhelds in the interim.
Project Kennan is the codename of Microsoft's partner Xbox handheld with ASUS. We understand that Kennan is targeting a launch for later this year. The hardware side is essentially finished, but there's a significant effort between the Xbox and Windows teams to improve the experience on the software side. Devices like the ASUS ROG Ally and Lenovo Legion Go already run on regular Windows 11, and the Xbox layers and apps have improved, but there's still a lot of improvements to be made.
It was always a bit unclear if Microsoft's handheld was designed to be a native Windows 11 PC gaming-style handheld, or more of a native Xbox console-style experience. But we potentially now have the answer.
It seems that it was indeed meant to be a device that could run full Xbox games, but Microsoft has decided to prioritize its teams on the partner opportunity around devices like Kennan — at least for now. I've been told that Microsoft still has big ambitions and is investing heavily to deliver a native Xbox handheld, but the shift is about prioritizing and allocating resources right now. There have been no layoffs or anything like that as a result of this reprioritization.
Microsoft is also working on next-gen Xbox cloud systems, which are now in testing at Microsoft's HQ in Redmond. The new cloud platform should bring its latency closer to parity with NVIDIA's GeForce Now service, which is arguably the performance leader right now (and still integrates Microsoft's Xbox / PC Game Pass). NVIDIA GeForce Now just launched a native app for the Steam Deck as well, presenting another competitor to Microsoft's cloud gaming strategy. Microsoft was previously working on a cloud-first mini console dubbed Hobart, which was also cancelled.
