Microsoft is strategically adjusting its handheld gaming ambitions, reportedly sidelining its own first-party Xbox console development to prioritize enhancing the Windows 11 experience for partner devices. This significant shift, according to a report from Windows Central, means the ASUS-developed “Project Kennan” handheld remains on track for a launch later this year, while Microsoft’s internal hardware takes a backseat. The decision is seen as a direct response to the superior performance of Valve’s SteamOS on similar portable gaming PCs.
This recalibration aims to address current deficiencies in Windows as a handheld gaming platform before Microsoft commits to its own branded device. “Just to emphasize here, it’s not Xbox’s ASUS device “Kennan” that is being pushed back. It’s Microsoft’s own internal Xbox handheld that has been shelved (for now),” Jez Corden of Windows Central clarified, underscoring that the ASUS partnership is unaffected.
The internal handheld was reportedly one of three prototype devices in development for Microsoft’s Gen-10 effort. While this specific project is now parked, Microsoft’s long-term vision for a native Xbox handheld reportedly persists.
Sources told Windows Central the company is “still deeply investing in developing its own Xbox gaming handheld technology in the future,” even while acknowledging that, for now, “priorities are moving more deeply towards third-party OEM handhelds in the interim.” The company emphasized that this reprioritization has not resulted in any layoffs.
For gamers, this pivot could mean more immediate improvements to the usability and performance of Windows-based handhelds from various manufacturers. However, a dedicated Microsoft Xbox handheld appears to be a more distant prospect. The company is also working on next-generation Xbox cloud systems, having previously cancelled a cloud-first mini console codenamed “Hobart,” as detailed by Windows Central.
The SteamOS Shadow and Windows’ Handheld Hurdles
The competitive pressure from SteamOS is a critical factor in Microsoft’s revised strategy. Tests on devices like Lenovo’s Legion Go S, have shown SteamOS providing not just a 5 to 10 percent performance boost in Windows-native games but also substantially better battery life—Dead Cells, for example, lasted over six hours on SteamOS versus under three on Windows.
“Windows on handhelds is in desperate need of some love, and Lenovo’s Legion Go S is the best evidence yet that Microsoft has a big Windows-shaped problem it has to solve on any upcoming Xbox-branded handhelds,” says Tom Warren of The Verge.
Microsoft executives have acknowledged these OS-level challenges. In January 2025, Jason Ronald, Microsoft’s Vice President of “Next Generation,” told The Verge that Windows has inherent design limitations for non-keyboard/mouse interfaces, such as inadequate native support for thumbsticks and joypads.
The company’s plan, he explained, involves “simplifying [the handheld experience] and making it much more like a console experience” by integrating Xbox software elements into the Windows foundation.
This is feasible because, as Ronald noted, the Xbox operating system itself is built upon Windows, allowing for shared infrastructure.
“Project Kennan” Moves Forward Amidst OS Overhaul
With its internal device development paused, Microsoft’s immediate focus shifts to supporting partner hardware like “Project Kennan.” This ASUS-built device, potentially using an AMD Z2 Extreme chip, is still expected later this year.
The success of Kennan and similar devices hinges on a more refined Windows experience. Microsoft decision basically means acknowledging the current limitations of Windows in the handheld space and wisely choosing to fix the foundation before building a new house on it.
This partner-centric approach aligns with long-standing desires within Microsoft. Xbox chief Phil Spencer, as far back as March 2024, expressed to Polygon his wish for third-party handhelds to “feel like an Xbox,” citing issues with game availability and user interface on then-current PC portables. While “Project Kennan” was a no-show at the recent Computex 2025, ASUS did introduce its ROG Bulwark Dock, signaling ongoing investment in the handheld accessory market.
Long-Term Vision and Ecosystem Evolution
Despite the current pause, Microsoft’s ambition for its own Xbox handheld is not extinguished. The company has a history of exploring portable gaming; former Xbox chief Robbie Bach revealed already in 2016, that an “Xboy” handheld was considered multiple times. The current strategy appears to be a pragmatic one: enhance the core Windows platform for all handhelds first.
This OS improvement effort is part of a broader evolution of the Xbox ecosystem. Microsoft recently launched a beta for its “Copilot for Gaming” AI assistant on the Xbox mobile app, designed to offer personalized help and game recommendations. Further announcements regarding Microsoft’s gaming strategy may come at the Xbox Showcase scheduled for June 8, 2025.
