There’s a very interesting article over at TeamXbox.com detailing some information about a supposed portable gaming device that Microsoft’s been working on. This device will apparently fall somewhere in between the Xbox 360 and the Zune.

The following information supposedly comes from anonymous sources within Microsoft:

• The device will be a “digital entertainment handheld” and is referred to by “xYz” — the Y denoting that it falls somewhere in between the Xbox and the Zune product lines.
• It will play games as well as movies and music. The anonymous sources say it’s unlike anything on the market today, but to think of it as a cross between the Sony Mylo, the PSP, and the iPod Touch. The iPod Touch reference is important because it underscores that the device will NOT have a cellular connection. The author of the piece, however, thinks it may have WiMAX.
• The device will apparently have “a large WVGA touchscreen” and “hardware features not found on any handheld on the market” — again, this could be WiMAX, plus there’s further speculation that it could contain NVIDIA’s new Tegra chipset and perhaps even play first-generation Xbox games.
• Sources say that this will be “a Live Anywhere device” with “a single online marketplace” that will blur the lines between the Zine, Xbox Live, and Sky marketplaces. For instance, if you buy a song or movie on your Xbox 360, you’ll be able to play it on this device — presumably it’d sync wirelessly. It’d also likely play Xbox Live Arcade games.
• The interface will be very similar to the New Xbox Experience interface.
• The device will compete with offering from Apple, Sony, Nintendo, and Google. So expect stuff like Live Maps, news, and traffic. Perhaps it’ll have a GPS chip (my own speculation).

Keep in mind that all this information supposedly comes from anonymous sources within Microsoft. Everything seems pretty credible and E3 is coming up in a couple weeks, which would be a perfect venue to announce such a device. However, as always, take this type of news with a grain of salt until more information is released.

Microsoft Working on Digital Entertainment Handheld [TeamXbox.com]