Are Microsoft planning to enter the handheld gaming market as well? The speculation is heating up...

Rumours have rumbled around for years that Microsoft is planning to enter the handheld market - Nintendo's traditional stronghold - to face both the DS and Sony's PSP. Recently, reports have emerged that the company is indeed developing a handheld system, though merely a digital-media player to compete with Apple's iPod.

However, the Seattle Times has now reported something different - and that the digital-media capabilities are just the tip of the iceberg. According to the Time's columnist Brier Dudley, Microsoft is planning something much more expansive.

"What's being developed is actually a complete line of Xbox-branded digital-media products, including a device that plays media, a software media player and an online media service."

Developed under the code-name 'Argo' (the warship used by the hero Jason in Greek mythology), the project is being overseen by Xbox co-founded J. Allard, and apparently has the full support of the company's millions.

Reported initially by Bloomberg News, the device is pencilled in for a Christmas release, though we're likely to hear more details from Microsoft's annual meeting with financial analysts, which takes place July 27th. Revo-Europe will of course keep you closely updated on Microsoft's plans.