Is Microsoft developing a Ybox or Yune?

Information has come to light through TeamXbox, that Microsoft are working on a digital entertainment handheld which currently is only known as project ?Y?. Why ?Y? you may ask? Well the new device will sit somewhere inbetween the Xbox and Zune devices, offering both gaming and media playback, as well as internet related services and downloads in a portable format. Y is the letter between X & Z. Although Ybox or Yune are both unlikely names for the new device, it is rumoured the device name will indeed start with the letter Y.

The image above is a fake mockup found only to represent this news story, but the new rumoured device is meant to be a portable gaming device and media player which includes Xbox Live Marketplace that enables you to download movies and arcade games for play on either the hand-held device or your console. The New Xbox Experience will also be even easier to use on the handheld over the console as it will have cover-flow like navigation options.

Sources that have leaked the information have stated:

When this handheld arrives, people will say it is Microsoft?s response to the iPhone, the Nintendo DS, the PSP, and so on, but it will be pretty evident that this device, its software, and services have been in the works for a very long time,?

Although the Microsoft handheld is definitely a converged device, this is not a Zune Phone.? The source added: ?Microsoft won’t compete with its Windows Mobile customers.?

Microsoft have not made any official announcements, but Major Nelson has posted via his twitter page (although it could be about anything):

“Working on a project that is probably the coolest opportunity I?ve had in a long time. I’ll share details when confirmed.