I believe that was the plan but they eventually diverted their efforts to making a touch screen smart-phone instead since it kept them from directly competing with Nintendo like Sony has been arrogantly been doing all this time. If you go back into old E3 articles I am sure you can find at least a couple on MS portables that never saw the light of day. I would rather they improve the OS on the dashboard so I can favorite and/or filter my collection easier. In this way, when a proper handheld comes out it will have a solid OS as the backbone. I actually looked at quite a few W7 phones and they are spiff and damn cheap to boot but they hardly compete with what iOS and Android phones offer in terms of sheer processing power. So, for the time being they are a cheap alternative to other phones. I would suggest just getting a nice tablet instead like the Nook.