The Bug in Microsoft's Ear

The software giant is mulling its own digital device that adds gaming to music and video, in an effort to compete with Apple's iPod empire

After getting trounced for four years in the digital music business by Apple Computer (AAPL), Microsoft (MSFT) finally seems poised to do something about it. BusinessWeek has learned that the software giant is working on plans to develop its own portable digital media device to rival the iPod, rather than just providing technology to partners. Microsoft hasn't decided if it will go ahead. But sources inside the company and at its partners say Microsoft has put together a team that's considering the business end of such an initiative.

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