As we have written in the past, Microsoft still continues to work on the development of a portable entertainment device. According to Shane Kim, it is really not a question of “if,” but “when” Microsoft will release such a device.

It is thought that the new portable entertainment device would meld the Xbox 360 technology with Zune technology to create a very usable product that would compete with Sony’s PlayStation Portable product.

Now the thinking is, according to our sources, that the Zune HD is the first step that Microsoft is making toward getting a portable Xbox device out the door. Still, a lot of other parts have to come into place, but it is thought that Microsoft is working with Nvidia and will likely use the Tegra chip as part of their new entertainment device.

Of course, we will not be looking for it this year, but next year is more likely at this point. Our sources insist that Microsoft is working with a bunch of concepts and prototypes in an effort to find the proper mix and in an effort to get it right before they will move into this space.