Strategic research and consulting firm The Diffusion Group has suggested, in its latest report titled On the Future of Portable Game Consoles: Analysis & Forecasts, that Microsoft will likely leverage its Xbox franchise to enter the portable game console (PGC) market in late 2007 or early 2008. According to the report, which tallies with recent suggestions by San Jose Mercury News journalist Dean Takahashi that executive J Allard is to head efforts by Microsoft to create a new portable, Xbox branded, console, Diffusion expects Microsoft to embed a portable multimedia player in a handheld gaming platform, similar to Sony's strategy with its PSP. "Microsoft has been waiting on the sidelines until its gaming console and software business reached sustainability, all the while watching closely how Nintendo and consumers in general would respond to Sony's PSP," said Thomas Wolf, a portable media analyst and co-author of TDG's latest report. Wolf continued: "With global PGC revenues expected to reach $3 billion annually by 2008, and with only Sony and Nintendo active in the PGC space, Microsoft has before it an incredible opportunity. It has a critical brand presence in the console space, the breadth and depth of gaming titles, and the marketing clout necessary to enter this space and win decent market share." These statements follow hints by Microsoft co-founder and chairman Bill Gates in a recent interview, in which he indicated that he foresees an all-in-one portable device which will fill the requirements of a media device, phone, and game console. However, he also stated in the interview that he feels that hardware technology currently isn't suitable for such a device. The report also suggested that Microsoft has, up until now, been evaluating a pair of options with regards to entering the portable gaming market: licensing a version of its OS for others to build portable hardware designs upon, or introducing its own branded portable game console. "While licensing the software is consistent with Microsoft's larger strategy, and no doubt Microsoft has endured many failures in regard to hardware plays, the success of the Xbox presents Microsoft with a unique opportunity," said Michael Greeson, CEO of The Diffusion Group and co-author of the report. "Microsoft owns an established and highly-regarded hardware brand, meaning that they can enter the PGC market from a position of strength, a privilege not enjoyed by any other player except those already active in the PGC space."