xYz handheld rumored to combine Xbox 360 and Zune

Here's a juicy rumor: could Microsoft be working on a portable gadget that combines the Xbox 360 with the Zune? Maybe!

The project, codenamed "xYz," is said to feature a WVGA touchscreen and a way to play music and movies on both the device as well as the Xbox 360. Basically, it's going to be a connected handheld gaming system with rich multimedia features. Sounds interesting, but will it actually come to exist? Time will tell.

Team Xbox via Gizmodo