Is there portable Xbox/Zune hybrid in the making?

Let me start by saying that this is basically a rumour, and no-one seems to know how verifiable it is, but there’re a couple of people out there pretty sure that this is legit. And if not, then count this as a concept gadget!

Ok, so the story is that Microsoft are developing a portable gaming device which should be a cross between the XBox 360 and the Zune music player. Currently named the xYz (oh those clever people- guesses for what the Y stands for in the comments, although my favourite guess is that its a subtle hint that the new devices actual name will begin with a Y, and as such bridges the gap between the two as well as being a device in its own right) it includes a portable gaming platform as well as an integrated media centre for music, videos and possibly even Internet related services such as a maps function, although apparently an anonymous source talking to teamxbox.com was at great pains to point out it would NOT be a phone, and so NOT a competitor to Apple iPhone. Or indeed, Microsoft’s own Windows Mobile customers.

There’s obviously no proper word on it yet, but if the device is real its apparently going to host a proper XBox Live style desktop, with market place capabilities, so you can buy games and videos over your xYz then play or watch them on your XBox 360, or vice versa.

If Microsoft are actually developing this and its not just Internet speculation (and as a fully paid up XBox fangirl I really hope it isn’t speculation!) then it does make sense. Playstation has the PSP; Nintendo has the DS, the DS Lite AND the DSi; an XBox alternative was surely just a matter of time. 

‘The "xYz" is supposed to have a large WVGA touchscreen display and "hardware features not found on any handheld on the market." ‘ Claims the source for Team Xbox. We’ll  have to wait for more news about what that could actually mean if this does get made (I don’t have much of an idea sad to say) but for now, let the speculation begin…