New report concludes Xboy to drop in 2008

Ubi fumus, ibi ignis. When there's smoke, there's fire. And there's a ton of smoke pouring out of the Xboy rumor, so how far behind can the fire be?

According to a new report (available here for the princely sum of $2490) released on Tuesday by analyst firm The Diffusion Group, Microsoft is planning to join the portable gaming market by 2008, giving the 360 some time to pick up steam.

TechWeb lists several key reasons why MS would want to enter another gaming market when they're still relative newcomers to the one they're in:

All the other kids are doing it: both Sony and Nintendo are doing quite well for themselves in the handheld gaming space.
More platforms for software means more potential software sales which means more royalties and more outlets for their recent in-game ad buy.
Oh yeah, the iPod. Educated guessers everywhere are saying the Xboy ain't gonna be just for games; expect a PSP-styled iPod killer. Good luck with that, fellas.

Of course this represents a significant investment on Microsoft's part, but the successes thus far of the Xbox project have proven this team's ability to get stuff done (unlike other Redmond teams). So either we could be seeing another handheld in 2008 or we'll chalk it up to rumor. Rumores volant. Rumors fly.