Xbox Handheld Within Two YearsA new report from The Diffusion Group suggests that Microsoft will use the recognition of the Xbox brand to enter the portable gaming market by either licensing portable gaming software or creating Xbox brand portable gaming hardware in late 2007/early 2008. "While licensing the software is consistent with Microsofts larger strategy, and no doubt Microsoft has endured many failures in regard to hardware plays, the success of the Xbox presents Microsoft with a unique opportunity," said Diffusion Group CEO and report co-author Michael Greeson. "Microsoft owns an established and highly-regarded hardware brand, meaning that they can enter the PGC [portable game console] market from a position of strength, a privilege not enjoyed by any other player except those already active in the PGC space." Portable media analyst and co-author of the report Thomas Wolf said that the software giant is just waiting for the right time to release a portable gaming device. "Microsoft has been waiting on the sidelines until its gaming console and software business reached sustainability, all the while watching closely how Nintendo and consumers in general would respond to Sonys PSP." He continued, "With global PGC revenues expected to reach $3 billion annually by 2008, and with only Sony and Nintendo active in the PGC space, Microsoft has before it an incredible opportunity. It has a critical brand presence in the console space, the breadth and depth of gaming titles, and the marketing clout necessary to enter this space and win decent market share." Dean Takahashi, San Jose Mercury News reporter and author of the recently released book, "The Xbox 360 Uncloaked", reported in March that Xbox vet J Allard had taken the helm of the Xbox handheld project. Prior to that revelation, BusinessWeek featured an article that cited unnamed Microsoft sources, stating that the company had assembled a team to measure the feasibility of a handheld device. The Diffusion Group expects a Microsoft portable to feature music playback, although Xbox chief Peter Moore told BusinessWeek in January, "It cant just be our version" of the Apple iPod.