There’s rumours suspected that Microsoft’s development team is working on bringing a PSP-killing handheld Xbox into the world – so much so that the new issue of T3 magazine (on sale today) has an exclusive picture of how it’ll look like.

Rumours suggest the handheld will have a webcam and 5-inch touchscreen – that’s half an inch more than the PSP’s panel. And it will certainly be multitalented, as much at ease with movies, music and photos as it is with games. Heck, it needs to be in order to make people want it: in the words of Microsoft’s games bigwig, Peter Moore, “it can’t just be our version of the iPod.”

[via T3]