Honey, I Shrunk the Xbox

Microsoft (Nasdaq: MSFT  ) may be finally ready to compete in the portable gaming market.

Sources are telling tech blog The Verge that the software giant is building a smaller version of its Surface tablet with gaming intentions. The Xbox Surface would be a 7-inch device running a modified version of Windows and customized with gamer-centric specs.

An Xbox Surface makes sense. It would buy Microsoft time before it refreshes its gaming console in a year or two.

Is it too late for portable gaming, though?

It's been a mystery as to why Microsoft has stayed out of the handheld gaming market. Nintendo (NASDAQOTH: NTDOY  ) has owned this market for years, and Sony (NYSE: SNE  ) hasn't exactly been a shrinking violet.

However, as Apple's (Nasdaq: AAPL  ) iOS and Google's (Nasdaq: GOOG  ) Android have gone on to sell hundreds of millions of smartphones and tablets apiece, gaming for mainstream players has taken on casual and social elements. The success of Apple's App Store and Google's own Android marketplace has opened the door for developers of all sizes to make a splash through free or nearly free diversions.

It's hard to justify springing $30 or more for a 3DS or PS Vita game these days, though the marquee releases do continue to do well.

By its very tablet-centric nature, an Xbox Surface would open itself up to cheaper games distributed digitally. That's a sound strategy, but will it be able to set itself apart from the countless other tablets on the market that already have access to hundreds of thousands of iOS and Android apps?

The one thing working in Microsoft's favor -- and it's something that it hasn't had with last month's Surface debut -- is a built-in audience of hardcore gamers that love their Xbox consoles and value their Xbox Live subscriptions. We'll see if that translates into a sizable market.

If not, the Xbox Surface can always become the "second screen" to the inevitable Xbox 720 -- just as Nintendo's new Wii U is counting on the dual-screen nature of its controller and the actual TV screen.

The game's afoot, even if Microsoft may be showing up too late to play.

Digital future
It's been a frustrating path for Microsoft investors, who've watched the company fail to capitalize on the incredible growth in mobile over the past decade. However, with the release of the Surface, along with the widely anticipated Windows 8 operating system, the company is looking to make a splash in this booming market. In this brand-new premium report on Microsoft, our analyst explains that while the opportunity is huge, the challenges are many. He's also providing regular updates as key events occur, so make sure to claim a copy of this report now by clicking here.

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  • Report this Comment On November 08, 2012, at 7:30 PM, matthewluke wrote:

    So we are just going to ignore that Microsoft has been in the past and is currently in portable gaming already? You have Xbox (for Windows Phone) games on Windows Phone 7 and Windows Phone 8 and there were Microsoft XNA games on the Zune hardware I believe starting in 2008.

    Consumers and developers have thus far ignored it as well, but Microsoft has been in portable gaming for a while now.

  • Report this Comment On November 09, 2012, at 10:27 AM, lucasmonger wrote:

    I think it will be a matter of who caves first, Microsoft or Nintendo or Sony, to offer their franchises (Halo/Mario/Gran Turismo) on IOS and Android. They could easily charge a premium price of $30 for the game and not have to deal with packaging, DVDs, shipping, etc. The first company to take that leap to letting someone else develop the hardware will likely survive. Trying to continue to develop your own gaming ecosystem just seems silly at this point.

  • Report this Comment On November 13, 2012, at 10:09 PM, matthewluke wrote:

    Since Sony sells Android devices and has a Playstation Store on Android, I'd guess that Sony would be the first to offer one of the flagship titles for a smartphone. Though Sony spends forever to make ANY Gran Turismo game, so don't expect THAT anytime soon, haha.

    And while not a game (but a companion app), Microsoft does have their Halo Waypoint app for iOS, Android and Windows Phone.

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