Xbox handheld canceled, Microsoft focuses on the software

Microsoft has reportedly cancelled plans for its own first-party Xbox handheld console to focus on software, specifically optimizing Windows 11 for portable devices and partnering with third-party hardware makers. The decision follows reports of unsustainable hardware manufacturing requirements, leading Microsoft to shift focus toward bringing the Xbox experience to existing handhelds like the ASUS ROG Ally. Console, which had the codename "Project Kennan", has been canceled.

Microsoft reportedly cancels in-houseXbox handheld focusing on Asus' ROG devices

Let's take a step back. Last week, ASUS and Microsoft launched 2 ROG Xbox Ally handhelds. These devices run on Windows, but also feature a special full-screen Xbox UI, where the Windows desktop doesn't load fully. Xbox and Windows engineers had teamed up to optimize the performance of the handheld, and it allows all PC games and apps to run using the Xbox app UI as a launcher.

Reports about the cancellation have drawn mixed reaction from Xbox fans, with many people saying they are disappointed by the news. Others were optimistic that this decision would allow Microsoft to focus on improving the software, while ASUS and other OEMs perfect the hardware of the console.

Early reviews of the ROG Xbox Ally X have been surprisingly positive, with particular praise for the smooth performance of the operating system. Maybe there's hope for Windows yet. There's more to this.

The Verge's Tom Warren reports that Microsoft marketed the ROG Xbox Ally as, "This is an Xbox". This video from Xbox highlights the work they have done. Xbox president Sarah Bond describes it as “For the first time, a player is going to be able to hold the power of the Xbox experience in their hand, and take it with them anywhere they want to go.” This is reportedly the experience that the next-gen Xbox will offer, the freedom of Windows in an Xbox console that offers players options to use any storefront and apps users want to use. It's almost like a hybrid Xbox PC, one that you power on, and your games are there.

This could be the direction the next-gen Xbox is heading towards, an Xbox that is not built by Microsoft, but made by third-party manufacturers. It might also give players more choice, and encourage competition in the market against the likes of Valve's Steam Deck and Nintendo Switch 2.