Is Microsoft actually working on a portable gaming device?

If the story about the Origami didn't fill your appetite for rumors, then this will surely do the trick. Dean Takahashi from Mercury News posted a blog entry this morning claiming that Microsoft is indeed working to create a mobile gaming and entertainment device--or, in other words, an "iPod Killer". The device would allow its users to play games, music, and video.

"In a bid to capture the huge audience for handheld entertainment gadgets," wrote Takahashi, "Microsoft is designing a product that combines video games, music and video in one handheld device."

From a business perspective, a move like this makes sense. Microsoft is competing with Sony and Nintendo in the console market, so why not compete in the handheld market as well? But, since the season for April Fools jokes is approaching fast, take this story with a grain of salt.