Rumors have circulated for some time that Microsoft was considering the device and many were disappointed when the recently announced Project Origami turned out to be little more than a scaled down laptop.
However, an article in the San Jose Mercury News suggests Microsoft really is gearing itself to take on industry giants Apple and Sony all at once.
The paper reports that Microsoft has already assigned its Xbox design team to the new project which will ultimately compete with the market leading devices Apple iPod and Sony PSP, though given that it is not due for release for another year or two, the industry landscape could be a very different place by then.
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