Microsoft developing its 'Xbox iPod' ?

Micosoft is preparing its own portable digital media device with gaming, music and video capabilties to counter Apple's iPod.

The company hasn't decided whether it will launch this product but they already put together a team to investigate the business end of such an initiative. Launching such a portable media device would be against Microsoft's current strategy of depending on dozens of partners to design and launch sleek devices with Microsoft based online-music service technology.
br> The current strategy doesn't work, BusinessWeek reports, as Apple is still extending its lead in the digital music market:

In 2005, Apple's share of portable media devices sold in the U.S. grew to 67% from 52% in 2004, according to NPD Group. Making its own device, despite an uneven track record in consumer electronics, may be Microsoft's only viable alternative.

The design of this product won't just be a copy of the iPod, Xbox boss Peter Moore says. The Microsoft media device would have to leverage the company's most most significant consumer strength, video gaming, although Moore didn't confirm Microsoft is considering making such a device. He also added that such a player would likely be launched under the Xbox brand.

Putting it under the Xbox brand might be risky, as consumers may think it's competition for the Sony PSP console instead of the Apple iPod and other popular portable media players.