Microsoft (MSFT) May Enter Smaller Tablet Market with New Gaming Device

Microsoft (Nasdaq: MSFT) is going to get into the smaller tablet game after all.

Ahead of the launch of Surface over the summer, some chatter sparked that Microsoft would be working on a smaller device as well. Today, TheVerge is all but affirming those plans, saying sources have told them about a new, gaming oriented "Xbox Surface" tablet.

The device will have a 7-inch screen size, similar to that of Apple's (Nasdaq: AAPL) new iPad Mini, Amazon's (Nasdaq: AMZN) Kindle Fire, and Google's (Nasdaq: GOOG) Nexus 7. The processor in the Xbox Surface will be an ARM Holdings (Nasdaq: ARMH)-based design.

TheVerge states that Microsoft has "locked down" parts of its offices in Silicon Valley, which immediately evokes the image of comically-oversized doors slamming down and trapping engineers inside "until the project is finished!" Anyway, the offices will have limited access to put the final touches on the device all while software engineers continue programming away.

The devices is likely to debut ahead of any next-generation Xbox Console. Just like the rest of Microsoft's recent releases, the tiny tablet is likely to integrate with the rest of the Windows 8 ecosystem as well as any next-generation Xbox.

Shares of Microsoft are just about flat Thursday, well off of session highs.

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