We already know Microsoft is willing to sacrifice great hardware cost to enter the console gaming market, with both the Xbox and Xbox 360 costing more to produce than they originally retailed for, so it's really no surprise that they are now setting their sites on the portable entertainment market as well. It isn't a for sure deal, but as Microsoft focuses more on entertainment and media, it's a probable move. The iPod has still not faced any seriously rivalry from any other company, and is enjoying a huge userbase that is growing rapidly. Is MS up to the challenge?

Xbox boss Peter Moore says any Microsoft media device would have to leverage the company's most significant consumer strength, video gaming. "It can't just be our version of the iPod," says Moore, who nonetheless would not confirm that Microsoft is considering making such a device. So in addition to playing music and videos, a Microsoft device would include games. Microsoft would probably use the Xbox brand to market the gadget. "I think the brand is an opportunity," Moore says.
The Xboxpod? I hope not. It's hard to imagine an mp3 player as compact and light as the iPod also being able to “game enough” to compete with the PSP or DS. Though it would be nice to see another company able to go toe to toe with the iPod, Microsoft may not be the best choice.