MS isn't making a gaming handheld. This is merely referring to the ZuneHD. It already has games and XNA compatibility. the only addition I see here is the Live Anywhee stuff. Which would be great additional functionality for it. This is still an mp3 player at heart. The touch screen will make playing games much better than the current Zune. Also, the nVidia video card that will be in it is pretty good as well.

You guys think they are entering a new market or something but that is not the case. They are just upgrading the Zune. XNA, XBLA, and Live make for an already compelling catalog of games. But then you have the Zune Marketplace which provides you with unlimited songs. I don't think the merger of Live and Zune will only be on the Zune, i think the merger will be seen on the 360 as well.

I don't think it's the smartest move introducing a handheld in which of the two current competitors (Iphone is mostly a joke as a gaming platform, with the very best games being about above average against the PSP and DS's software lineup), 1 is clearly market leader and showing no signs of stopping and the other is still quite strong AND making a profit.

But, next handheld generation:
- Two analogue sticks
- Sleek clamshell design
- touch screen (not essential)
- included headphones with headset
- Connectivity to Xbox 3 or 720
- built-in wifi
- Relatively cheap (At least not as expensive as the PSP is to the DS this generation)
- Not too bulky
- Focus on awesome 2D or 2.5D art graphics and at least slightly better than PSP 3D graphics.

It may be a hybrid (read: copy cat) but they may have a winner on their hands.