Microsoft could be planning to releasing a portable multimedia device designed to rival Apple's iPod as early as Christmas 2006, according to a new report from Bloomberg.
Rumours that the Redmond giant is working on a handheld machine have been circulating for some months now, with 'Xbox 360 Uncloaked' author Dean Takahashi adding fuel to the fire in spite of Microsoft's refusal to comment on speculation.
The report from Bloomberg suggests that Microsoft is planning to release a portable music and video player - making no mention of videogame functionality - with the intention of challenging Apple's massive 77 per cent market share of US digital music player market.
According to the report, Apple commands 72 per cent of music downloads with its iTunes music store; Microsoft's MSN music store accounts for just 3 per cent.
It's this huge hold on the digital music and video sector that MS wants to challenge, the report suggests - apparently the company has been negotiating content for a new digital download service from companies including EMI, Universal Music Group, Fox, CBS and NBC.
Sources claim the new device - allegedly created under the guidance and supervision of Xbox evangelist J Allard with entertainment and devices president Robbie Bach - will allow consumers to download music using Wi-Fi technology. It's said to offer better picture quality than Apple's iPod.
It's still unclear whether or not there will be any game-related functionality for the device, or if it is simply designed to compete with Microsoft's biggest rival in the digital music and video sector.
Given the alleged involvement of J. Allard and Robbie Bach, a handheld that also plays games would certainly seem possible. But, once again, speculation is likely to continue until Microsoft decides to disclose its plans.